UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-10197
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Nuveen California Dividend Advantage Municipal Fund 2
--------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
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(Address of principal executive offices) (Zip code)
Kevin J. McCarthy
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
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(Name and address of agent for service)
Registrant's telephone number, including area code: (312) 917-7700
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Date of fiscal year end: August 31
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Date of reporting period: August 31, 2007
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
ANNUAL REPORT
August 31, 2007
Nuveen Investments
MUNICIPAL CLOSED-END FUNDS
Photo of: Small child
NUVEEN INSURED CALIFORNIA
PREMIUM INCOME MUNICIPAL
FUND, INC.
NPC
NUVEEN INSURED CALIFORNIA
PREMIUM INCOME MUNICIPAL
FUND 2, INC.
NCL
NUVEEN CALIFORNIA
PREMIUM INCOME
MUNICIPAL FUND
NCU
NUVEEN CALIFORNIA
DIVIDEND ADVANTAGE
MUNICIPAL FUND
NAC
NUVEEN CALIFORNIA
DIVIDEND ADVANTAGE
MUNICIPAL FUND 2
NVX
NUVEEN CALIFORNIA
DIVIDEND ADVANTAGE
MUNICIPAL FUND 3
NZH
NUVEEN INSURED CALIFORNIA
DIVIDEND ADVANTAGE
MUNICIPAL FUND
NKL
NUVEEN INSURED CALIFORNIA
TAX-FREE ADVANTAGE
MUNICIPAL FUND
NKX
It's not what you earn, it's what you keep.(R)
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Chairman's
LETTER TO SHAREHOLDERS
Photo of: Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
Once again, I am pleased to report that over the twelve-month period covered by
this report your Fund continued to provide you with attractive monthly tax-free
income. For more details about the management strategy and performance of your
Fund, please read the Portfolio Manager's Comments, the Dividend and Share Price
Information, and the Performance Overview sections of this report.
I also wanted to take this opportunity to report some important news about
Nuveen Investments. We have accepted a "buyout" offer from Madison Dearborn
Partners, LLC. While this will affect the corporate structure of Nuveen
Investments, it will have no impact on the investment objectives of the Funds,
portfolio management strategies or their dividend policies. We will provide you
with additional information about this transaction as more details become
available.
For some time, I've used these letters to remind you that municipal bonds can be
an important building block in a well-balanced investment portfolio. In addition
to providing attractive tax-free monthly income, a municipal bond investment
like your Fund may help you achieve and benefit from greater portfolio
diversification. Portfolio diversification is a recognized way to try to reduce
some of the risk that comes with investing. For more information about this
important investment strategy, I encourage you to contact your personal
financial advisor.
We also are pleased to be able to offer you a choice concerning how you receive
your shareholder reports and other Fund information. As an alternative to mailed
copies, you can sign up to receive future Fund reports and other Fund
information by e-mail and the internet. The inside front cover of this report
contains information on how you can sign up.
We are grateful that you have chosen us as a partner as you pursue your
financial goals and we look forward to continuing to earn your trust in the
months and years ahead. At Nuveen Investments, our mission continues to be to
assist you and your financial advisor by offering investment services and
products that can help you to secure your financial objectives.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
October 15, 2007
Portfolio Manager's COMMENTS
Nuveen Investments Municipal Closed-End Funds
NPC, NCL, NCU, NAC,
NVX, NZH, NKL, NKX
Portfolio manager Scott Romans reviews national and state economic and municipal
market environments, key investment strategies, and the annual performance of
these eight Nuveen California Municipal Funds. Scott, who joined Nuveen in 2000,
has managed NCU, NAC, NVX, NZH, NKL, and NKX since 2003. He assumed portfolio
management responsibility for NPC and NCL in 2005.
WHAT FACTORS AFFECTED THE U.S. ECONOMY AND MUNICIPAL MARKET DURING THE ANNUAL
REPORTING PERIOD ENDED AUGUST 31, 2007?
Between September 1, 2006, and August 31, 2007, the yield on the benchmark
10-year U.S. Treasury note dropped a total of almost 20 basis points to end the
reporting period at 4.54%. In the municipal market, the yield on the Bond Buyer
25 Revenue Bond Index, a widely followed measure of longer-term municipal market
rates, fell to 4.83% at the end of August 2007, a net decline of 8 basis points
from the end of August 2006. Although longer-term municipal bond interest rates
generally declined during the first nine months of this reporting period,
developments in the financial sector, especially in the credit markets, led to
increased volatility, tightening liquidity, and a flight to quality during the
final three months of the period. This was particularly evident in August 2007,
when market concerns about defaults on sub-prime mortgages resulted in a
liquidity crisis across all fixed income asset classes. (We should note that the
Nuveen California Municipal Closed-End Funds had no exposure to the
collateralized debt products that were at the center of this liquidity crisis.)
During the month of August, the yield on the Bond Buyer 25 Revenue Bond Index
jumped 20 basis points from its July 31 level, even as the yield on the 10-year
Treasury note dropped almost 25 basis points. These dramatic changes were
indicative of the highly unusual dislocation between the direction of rate
changes in the municipal and taxable fixed income markets during the last part
of this period.
Throughout this 12-month reporting period, the Federal Reserve elected to stay
on the sidelines, leaving monetary policy unchanged as it kept close tabs on the
pace of economic growth, the situation in the housing market, and inflationary
pressures, including higher energy prices. (On September 18, 2007, after the
close of this reporting period, the Fed made its first adjustment to the fed
discount rate in 15 months, cutting this target rate from 5.25% to 4.75%.)
Through much of this period, the U.S. gross domestic product (GDP), a closely
watched measure of economic growth, operated at below-trend levels, expanding at
a rate of 1.1% in the third quarter of 2006, 2.1% in the fourth quarter of 2006,
and 0.6% in the first quarter of 2007, the weakest reading since 2002 (all GDP
numbers annualized). However, in the second quarter of 2007, increases in
government and business spending and exports helped GDP growth rebound
Discussions of specific investments are for illustration only and are not
intended as recommendations of individual investments. The views expressed
herein represent those of the portfolio manager as of the date of this report
and are subject to change at any time, based on market conditions and other
factors. The Funds disclaim any obligation to advise shareholders of such
changes.
4
sharply to 3.8%, overcoming a 12% decline in residential investment and
noticeable deceleration in consumer spending. While the Consumer Price Index
(CPI) registered a 2.0% year-over-year gain as of August 2007, the increase in
this inflation gauge for the first eight months of 2007 was 3.7%, driven largely
by gains in energy and food prices. The core CPI (which excludes food and energy
prices) rose 2.3% between January and August 2007, remaining above the Fed's
unofficial target of 2.0% or lower. The labor market continued to be tight, with
a national unemployment rate of 4.6% in August 2007, down from 4.7% in August
2006.
Over the 12 months ended August 2007, municipal bond issuance nationwide totaled
$437.3 billion, up 22% from the previous 12 months. During the first eight
months of 2007, $289.4 billion in new securities came to market, up 21% over the
same period in 2006. A major factor in 2007 volume was the 36% increase in
advance refundings,1 driven by attractive borrowing rates for issuers during the
first part of the year. In the month of August, however, as municipal bond
interest rates rose, advance refundings fell off almost 33%, and several
scheduled issues were postponed. For the majority of the period, the strength
and diversity of demand for municipal bonds were important factors, as the surge
in issuance was absorbed by a broad-based universe of traditional and
non-traditional buyers, including retail investors, institutional investors such
as hedge funds and arbitragers, and overseas investors.
HOW WERE THE ECONOMIC AND MARKET ENVIRONMENTS IN CALIFORNIA DURING THIS PERIOD?
In terms of gross domestic product by state, California ranked as the 13th
fastest growing state economy in the nation in 2006, with growth of 4.2% versus
the national average of 3.4%. The state's economy remained diverse, with
international trade, technology, tourism, finance, and defense serving as key
drivers. California's ports continued to benefit from trade with Asia, and
strong global demand for technology products was positive for the state's
long-term economic outlook. While overall economic growth remained strong, the
California housing market was an area with greater exposure to riskier,
non-traditional mortgage products, and we continued to monitor this situation
for signs of potential impact on the state's economy. In recent months, the
slowdown in the housing sector contributed to job losses in the construction
industry, which were offset to some degree by job creation in other sectors. For
the majority of this reporting period, California ranked second in the nation in
terms of job creation. By August 2007, however, California's unemployment rate
had risen to 5.5%, its highest level in more than two years, up from 4.9% in
August 2006. Demographic trends in the state remained positive, with population
growth of 7.6% over the past six years, compared with the national average of
6.4%.
After a delay of almost two months, the $145.5 billion California state budget
for fiscal 2008 was approved in late August 2007, following final cuts totaling
$700 million. Among the programs affected by the reductions were naturalization
services, the state's discount prescription drug plan, and several Medi-Cal
programs, while the $57 billion
1 Advance refundings, also known as pre-refundings or refinancings, occur when
an issuer sells new bonds and uses the proceeds to fund principal and interest
payments of older existing bonds. This process often results in lower borrowing
costs for bond issuers.
5
budget for elementary and high school education was largely spared. In March
2007, Moody's and Standard & Poor's confirmed their ratings on California's
general obligation bonds at A1 and A+, respectively, while Fitch affirmed its A+
rating in June 2007. All three rating agencies maintained stable outlooks for
the state. For the 12 months ended August 31, 2007, municipal issuance in
California totaled $67.4 billion, an increase of 38% over the previous 12
months. During the first eight months of 2007, California supply rose even more
sharply, up 62% from that of January-August 2006, to $49.3 billion. California
remained the largest state issuer in the nation for both the 12-month and
year-to-date periods.
WHAT KEY STRATEGIES WERE USED TO MANAGE THE CALIFORNIA FUNDS DURING THIS ANNUAL
REPORTING PERIOD?
In the municipal market environment of the past 12 months, we continued to
emphasize a disciplined approach to duration2 management and yield curve
positioning. In all eight of these Funds, our duration management strategies
during this period included the use of inverse floating rate securities,3 a type
of derivative financial instrument. The inverse floaters had the dual benefit of
bringing the Funds' durations closer to our preferred strategic target and
enhancing the Funds' income-generation capabilities. This strategy was deployed
at varying levels depending on the individual needs of each Fund.
As discussed in past shareholder reports, we have also used Treasury futures
contracts and forward interest rate swaps (additional types of derivative
instruments) as duration management tools when we believed this supported our
overall investment performance strategies. The goal of this strategy is to help
us manage net asset value (NAV) volatility without having a negative impact on
the Funds' income streams or common share dividends over the short term. During
this reporting period, we employed forward interest rate swaps in all eight of
these Funds, while NAC also held a small position in U.S. Treasury futures
contracts. As of August 31, 2007, the swaps remained in place in each of the
Funds, while NAC's position in futures contracts had been closed out.
With California's sizeable increase in municipal bond issuance during this
period, new supply as well as advance refundings and debt restructurings
provided us with a greater variety of bonds and sectors from which to choose.
During the spring and early summer of 2007, a number of uninsured offerings from
major California health care systems--mostly rated AA or A--came to market at
very attractive prices. Because of the volume of issuance, the spread levels on
these offerings were wider than historical norms, and we added a substantial
number of new hospital and health care related issues. We found these
opportunities attractive based not only on their price, but also on their
performance potential and the support they could provide for the Funds' income
streams. We also participated in the $4.5 billion Golden State Tobacco
Securitization offering in March 2007, the largest municipal bond deal of the
first half of 2007. These tobacco bonds were offered at attractive spreads wider
than the national norm, and we added significant positions across the complex of
California Funds that can purchase uninsured bonds. The additions helped to
bring these Funds' tobacco exposure closer to the market average. During this
period, we also purchased single family housing bonds as a good way to add
income to the California Funds.
2 Duration is a measure of a bond's price sensitivity as interest rates change,
with longer duration bonds displaying more sensitivity to these changes than
bonds with shorter durations.
3 An inverse floating rate security is a financial instrument designed to pay
long-term tax-exempt interest at a rate that varies inversely with a short-term
tax-exempt interest rate index. For the Nuveen Funds, the index typically used
is the Securities Industry and Financial Markets (SIFM) Municipal Swap Index
(previously referred to as the Bond Market Association Index or BMA). Inverse
floaters, including those inverse floating rate securities in which the Funds
invested during the 12-month period, are further defined within the "Notes to
Financial Statements" and "Glossary of Terms Used in This Report" sections of
this shareholder report.
6
As liquidity in the fixed income markets tightened in July and August, we also
took advantage of offerings in the secondary markets to add various credit
positions at very attractive levels. This was especially true in the Dividend
Advantage Funds (NAC, NVX, NZH) that can invest in subinvestment-grade credits.
Among our purchases were community facilities district bonds, marking the first
time in several years that we added these bonds to some of the Funds. Until
recently, we believed that yields on these bonds were too low to compensate us
for the securities' risk. However, following the municipal market's challenges,
yields on these securities reached six percent, providing what we believed were
compelling opportunities in this sector. In the insured Funds, we watched for
opportunities to capitalize on the credit situation by buying insured bonds with
weaker underlying credits that represented value prospects. During the last part
of this period, we add insured bonds from the tobacco, health care, and other
subsectors that were trading at attractive levels to the four insured Funds
(NPC, NCL, NKL, NKX).
To generate cash for purchases and to help move the Funds' durations closer to
our strategic target, we sold holdings with shorter durations, including
short-dated pre-refunded bonds and callable bonds priced to short calls. As
interest rates rose late in the period, we also found a wide variety of
opportunities to sell holdings that were purchased when yields were lower and
replace them with similar, newer credits that yielded comparatively more. This
process allowed us to maintain the Funds' current portfolio characteristics
while strengthening their future income streams.
HOW DID THE FUNDS PERFORM?
Individual results for these Nuveen California Municipal Funds, as well as
relevant index and peer group information, are presented in the accompanying
table.
Total Returns on Net Asset Value*
For periods ended 8/31/07
Uninsured Funds 1-Year 5-Year 10-Year
NCU 0.82% 5.27% 6.19%
NAC 1.16% 5.86% NA
NVX 0.46% 5.77% NA
NZH -0.32% 5.71% NA
Lehman Brothers CA
Tax-Exempt Bond Index4 2.08% 4.31% 5.37%
Lipper CA Municipal
Debt Funds Average5 0.34% 5.48% 5.63%
Insured Funds
NPC 1.70% 4.77% 5.73%
NCL 1.18% 4.80% 5.96%
NKL 1.13% 5.80% NA
NKX 1.69% NA NA
Lehman Brothers Insured CA
Tax-Exempt Bond Index4 2.11% 4.24% 5.43%
Lipper Insured CA Municipal
Debt Funds Average6 0.68% 4.55% 5.46%
*Annualized
Past performance is not predictive of future results. Current performance may be
higher or lower than the data shown. Returns do not reflect the deduction of
taxes that shareholders may have to pay on Fund distributions or upon the sale
of Fund shares.
For additional information, see the individual Performance Overview for your
Fund in this report.
4 The Lehman Brothers California Tax-Exempt Bond Index is an unleveraged,
unmanaged index comprising a broad range of investment-grade California
municipal bonds, while the Lehman Brothers Insured California Tax-Exempt Bond
Index is an unleveraged, unmanaged index containing a broad range of insured
California municipal bonds. Results for the Lehman indexes do not reflect any
expenses.
5 The Lipper California Municipal Debt Funds Average category is calculated
using the returns of all closed-end funds in this category for each period as
follows: 1 year, 24; 5 years, 23; and 10 years, 12. Fund and Lipper returns
assume reinvestment of dividends.
6 The Lipper Insured California Municipal Debt Funds average is calculated using
the returns of all closed-end funds in its category for each period as follows:
1 year, 13; 5 years, 10; and 10 years, 6. Fund and Lipper returns assume
reinvestment of dividends.
7
For the 12 months ended August 31, 2007, the total returns on NAV for NCU, NAC,
NVX, and NZH underperformed the return on the Lehman Brothers California
Tax-Exempt Bond Index. The returns on NCU, NAC, NVX and NZH all trailed the
Lipper California Municipal Debt Funds Average Category. All four of the
California insured Funds lagged the return on the Lehman Brothers Insured
California Tax-Exempt Bond Index, but outperformed the average return for the
Lipper Insured California peer group.
One of the key factors in the annual performance of these Funds relative to
those of their respective unleveraged Lehman Brothers California indexes was the
use of financial leverage. The returns of all of these Funds were negatively
impacted by their use of leverage during this period. Although leveraging
provides opportunities for additional income and total returns for common
shareholders, it can also expose shareholders to additional risk when market
conditions are favorable. With the dramatic increase in yields on longer-term
municipal bond interest rates during the last part of this period, the impact of
the valuation changes in these bonds was magnified by the use of leverage in
these eight Funds. Some of the differential in the one-year returns among these
Funds can be attributed to the variation in the percentage of assets that was
leveraged in each Fund. That is, the greater the percentage of a Fund's
portfolio that was leveraged, the greater the negative impact on that Fund's
performance during this period. Among these Funds, NZH had a slightly higher
leverage ratio, which was negative for performance.
While the value provided by leverage was limited over this reporting period, we
firmly believe that the use of this strategy should work to the benefit of
leveraged Funds over the long term. This is demonstrated by the five-year and
ten-year return performances--both absolute and relative to the Lehman Brothers
California Tax-Exempt Bond Index and Lehman Brothers Insured California
Tax-Exempt Bond Index--of the Funds in this report.
In the interest rate environment over the past 12 months, municipal bonds with
maturities of seven years and less, as measured by the Lehman Brothers Municipal
Bond Index7, performed best, generally outpacing municipal bonds with longer
maturities. The goal among all of these Funds was the same: to reduce relative
risk by decreasing the distance between the Funds' durations and the strategic
target duration. With the exception of NZH, that involved working to lengthen
duration in each of these seven funds. However, the durations of these seven
Funds continued to be somewhat short of the target, due in part to a large
number of advance refundings, which had a shortening effect on duration, as well
as the natural tendency of bond durations to shorten as time passes. With the
strong performance of shorter maturity bonds, this positioning proved to be
positive for the performance of these seven Funds during this period. NZH, on
the other hand, had a longer duration that we were working to shorten. During
this period, both NZH's longer duration and the strategies intended to shorten
that duration hurt this Fund's performance.
7 The Lehman Brothers Municipal Bond Index is an unleveraged, unmanaged national
index comprising a broad range of investment-grade municipal bonds. Results for
the Lehman index do not reflect any expenses.
8
In addition, pre-refunded bonds, especially those that were advance refunded
before longer rates rose in mid-2007, performed very well during this period,
and we continued to see positive contributions from advance refunding activity,
which benefited the Funds through both price appreciation and enhanced credit
quality. The varying rates of pre-refundings in several of the Funds also
influenced their relative performances for this period. For example, NKX had a
much higher incidence of advance refundings (approximately 19%) than NKL.
In addition, a few of the bonds that were pre-refunded in NKX were lower-rated
credits, where the positive impact of price and credit upgrade is most
significant.
While the impact of credit quality and sector allocation on Fund performance was
outweighed by duration and the use of derivatives during this period, we should
note that lower credit quality bonds generally underperformed the municipal
market as a whole for the first time in several years, as longer municipal rates
rose and credit spreads widened. However, structure played an important role in
the relative performance of bonds in this credit quality segment. Lower-rated
credits that had higher coupons tended to remain at a premium as interest rates
backed up during the summer of 2007, enabling these bonds to at least perform in
line with the market during this period. At the same time, some of the
lower-rated bonds added to the Funds during the earlier part of this period did
not have higher coupons and were priced at par or even a slight discount,
leading to underperformance as spreads widened.
In looking at the performance of the non-insured Funds, NAC had a heavier
weighting in lower-rated bonds with higher coupons and shorter durations, while
NZH had more exposure to lower-rated bonds with lower coupons and longer
durations, a combination that underperformed during this period. Part of the
difference in exposure between these two Funds was due to the market environment
since their introductions. NAC was established in 1999, when the market offered
more opportunities to purchase higher coupon bonds, while those opportunities
have been rare since NZH was introduced in 2001.
Revenue bonds in general, and specifically the industrial development and health
care sectors that had ranked among the top performers in the Lehman Brothers
Municipal Bond Index over the past few years, also underperformed the general
municipal market for this period. Zero coupon bonds also generally posted poor
performance due to their longer durations. Sectors of the market that performed
well during this period included transportation, water and sewer and special
tax-backed issues.
9
Dividend and Share Price
INFORMATION
As previously noted, all of the Funds in this report use leverage to potentially
enhance opportunities for additional income for common shareholders. Although
the Funds' use of this strategy continued to provide incremental income, the
extent of this benefit was reduced during this period due to short-term interest
rates that remained relatively high, which, in turn, kept the Funds' borrowing
costs high. The Funds' income streams were also impacted as the proceeds from
older, higher-yielding bonds that matured or were called were reinvested into
bonds currently available in the market, which generally offered lower yields
during the majority of this period. These factors resulted in a single monthly
dividend reduction in NCU, NAC, and NKL and two reductions in NVX and NZH over
the 12-month period ended August 31, 2007. The dividends of NPC, NCL, and NKX
remained stable throughout this reporting period.
Due to capital gains generated by normal portfolio activity, common shareholders
of the following Funds received capital gains and/or net ordinary income
distributions at the end of December 2006 as follows:
Short-Term Capital Gains
Long-Term Capital Gains and/or Ordinary Income
(per share) (per share)
NPC $0.0754 $0.0058
NCU $0.0308 --
NAC $0.0533 --
NKL $0.0026 --
All of the Funds in this report seek to pay stable dividends at rates that
reflect each Fund's past results and projected future performance. During
certain periods, each Fund may pay dividends at a rate that may be more or less
than the amount of net investment income actually earned by the Fund during the
period. If a Fund has cumulatively earned more than it has paid in dividends, it
holds the excess in reserve as undistributed net investment income (UNII) as
part of the Fund's NAV. Conversely, if a Fund has cumulatively paid dividends in
excess of its earnings, the excess constitutes negative UNII that is likewise
reflected in the Fund's NAV. Each Fund will, over time, pay all of its net
investment income as dividends to shareholders. As of August 31, 2007, all of
the Funds in this report except NPC had a positive UNII balance for tax purposes
and a negative UNII balance for financial statement purposes. NPC had a positive
UNII balance for both tax and financial statement purposes.
10
As of August 31, 2007, the Funds' share prices were trading at premiums or
discounts to their NAVs as shown in the accompanying chart:
8/31/07 12-Month Average
Premium/Discount Premium/Discount
NPC -0.53% -1.95%
NCL -5.45% -4.35%
NCU -7.33% -4.39%
NAC -3.95% +0.82%
NVX -6.54% -1.96%
NZH -5.12% -0.76%
NKL -4.49% +0.03%
NKX 0.00% -0.70%
11
NPC
Performance
OVERVIEW
Nuveen Insured California Premium Income Municipal Fund, Inc.
as of August 31, 2007
Pie Chart:
Credit Quality (as a % of total investments)
Insured 68%
U.S. Guaranteed 32%
Bar Chart:
2006-2007 Monthly Tax-Free Dividends Per Share2
Sep 0.0605
Oct 0.0605
Nov 0.0605
Dec 0.0605
Jan 0.0605
Feb 0.0605
Mar 0.0605
Apr 0.0605
May 0.0605
Jun 0.0605
Jul 0.0605
Aug 0.0605
Line Chart:
Share Price Performance -- Weekly Closing Price
9/01/06 15.03
14.9899
14.92
15.51
15.32
15.32
15.01
14.98
14.81
14.89
15.02
15.05
15.11
15.24
15.79
15.2
15.06
15.03
15.15
15.29
15.1401
14.95
15.1
15.07
15.2101
15.1
15.15
15.153
15.19
15.15
15.24
15.51
15.4799
15.5
15.72
15.47
15.55
15.55
15.55
15.76
15.55
15.25
14.75
14.78
14.91
14.5
14.4
14.4
14.43
14.45
13.95
14.17
8/31/07 14.96
FUND SNAPSHOT
-----------------------------------
Common Share Price $14.96
-----------------------------------
Common Share
Net Asset Value $15.04
-----------------------------------
Premium/(Discount) to NAV -0.53%
-----------------------------------
Market Yield 4.85%
-----------------------------------
Taxable-Equivalent Yield1 7.43%
-----------------------------------
Net Assets Applicable
to Common Shares ($000) $97,176
-----------------------------------
Average Effective Maturity
on Securities (Years) 15.20
-----------------------------------
Leverage-Adjusted Duration 9.38
-----------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 11/19/92)
-----------------------------------
ON SHARE PRICE ON NAV
-----------------------------------
1-Year 4.61% 1.70%
-----------------------------------
5-Year 5.23% 4.77%
-----------------------------------
10-Year 6.44% 5.73%
-----------------------------------
INDUSTRIES
(as a % of total investments)
-----------------------------------
U.S. Guaranteed 31.6%
-----------------------------------
Tax Obligation/General 21.5%
-----------------------------------
Tax Obligation/Limited 19.7%
-----------------------------------
Water and Sewer 16.4%
-----------------------------------
Education and
Civic Organizations 5.4%
-----------------------------------
Other 5.4%
-----------------------------------
1 Taxable-Equivalent Yield represents the yield that must be earned on a fully
taxable investment in order to equal the yield of the Fund on an after-tax
basis. It is based on a combined federal and state income tax rate of 34.7%.
When comparing this Fund to investments that generate qualified dividend income,
the Taxable-Equivalent Yield is lower.
2 The Fund paid shareholders capital gains and net ordinary income distributions
in December 2006 of $0.0812 per share.
12
NCL
Performance
OVERVIEW
Nuveen Insured California Premium Income Municipal Fund 2, Inc.
as of August 31, 2007
Pie Chart:
Credit Quality (as a % of total investments)
Insured 75%
U.S. Guaranteed 25%
Bar Chart:
2006-2007 Monthly Tax-Free Dividends Per Share
Sep 0.056
Oct 0.056
Nov 0.056
Dec 0.056
Jan 0.056
Feb 0.056
Mar 0.056
Apr 0.056
May 0.056
Jun 0.056
Jul 0.056
Aug 0.056
Line Chart:
Share Price Performance -- Weekly Closing Price
9/01/06 14.24
14.22
14.19
14.29
14.35
14.27
14.3
14.14
14.08
14.1399
14.2075
14.08
14.13
14.21
14.46
14.28
14.27
14.26
14.25
14.29
14.2
14.12
14.17
14.25
14.26
14.26
14.28
14.45
14.36
14.36
14.55
14.6899
14.46
14.38
14.65
14.59
14.55
14.55
14.61
14.56
14.38
14.22
14.35
14.24
14.03
13.89
14.16
13.59
13.81
13.57
13.13
13.5
8/31/07 13.71
FUND SNAPSHOT
-----------------------------------
Common Share Price $13.71
-----------------------------------
Common Share
Net Asset Value $14.50
-----------------------------------
Premium/(Discount) to NAV -5.45%
-----------------------------------
Market Yield 4.90%
-----------------------------------
Taxable-Equivalent Yield1 7.50%
-----------------------------------
Net Assets Applicable to
Common Shares ($000) $184,343
-----------------------------------
Average Effective Maturity
on Securities (Years) 16.10
-----------------------------------
Leverage-Adjusted Duration 9.86
-----------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 3/18/93)
-----------------------------------
ON SHARE PRICE ON NAV
-----------------------------------
1-Year 1.26% 1.18%
-----------------------------------
5-Year 4.12% 4.80%
-----------------------------------
10-Year 5.90% 5.96%
-----------------------------------
INDUSTRIES
(as a % of total investments)
-----------------------------------
Tax Obligation/Limited 29.7%
-----------------------------------
U.S. Guaranteed 25.3%
-----------------------------------
Tax Obligation/General 13.7%
-----------------------------------
Water and Sewer 13.3%
-----------------------------------
Utilities 5.3%
-----------------------------------
Other 12.7%
-----------------------------------
1 Taxable-Equivalent Yield represents the yield that must be earned on a fully
taxable investment in order to equal the yield of the Fund on an after-tax
basis. It is based on a combined federal and state income tax rate of 34.7%.
When comparing this Fund to investments that generate qualified dividend income,
the Taxable-Equivalent Yield is lower.
13
NCU
Performance
OVERVIEW
Nuveen California Premium Income Municipal Fund
as of August 31, 2007
Pie Chart:
Credit Quality (as a % of total investments)
AAA/U.S.
Guaranteed 62%
AA 9%
A 12%
BBB 12%
BB or Lower 4%
N/R 1%
Bar Chart:
2006-2007 Monthly Tax-Free Dividends Per Share2
Sep 0.0565
Oct 0.0565
Nov 0.0565
Dec 0.0565
Jan 0.0565
Feb 0.0565
Mar 0.0565
Apr 0.0565
May 0.0565
Jun 0.0535
Jul 0.0535
Aug 0.0535
Line Chart:
Share Price Performance -- Weekly Closing Price
9/01/06 14.01
13.8
13.9111
14
13.93
13.85
13.79
13.71
13.73
13.83
13.85
13.85
13.92
13.9198
14.03
13.99
14.01
13.99
14.15
14.12
14.18
13.99
14.1106
14.39
14.12
14.05
14.07
14.1
13.944
14.05
14.14
14.28
14.26
14.2
14.44
14.5345
14.35
14.3
14.46
14.5
14.35
13.8768
13.55
13.77
13.63
13.36
13.15
12.82
13.2
13.18
12.63
12.86
8/31/07 13.03
FUND SNAPSHOT
-----------------------------------
Common Share Price $13.03
-----------------------------------
Common Share
Net Asset Value $14.06
-----------------------------------
Premium/(Discount) to NAV -7.33%
-----------------------------------
Market Yield 4.93%
-----------------------------------
Taxable-Equivalent Yield1 7.55%
-----------------------------------
Net Assets Applicable to
Common Shares ($000) $81,200
-----------------------------------
Average Effective Maturity
on Securities (Years) 17.03
-----------------------------------
Leverage-Adjusted Duration 9.65
-----------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 6/18/93)
-----------------------------------
ON SHARE PRICE ON NAV
-----------------------------------
1-Year -2.21% 0.82%
-----------------------------------
5-Year 4.58% 5.27%
-----------------------------------
10-Year 5.93% 6.19%
-----------------------------------
INDUSTRIES
(as a % of total investments)
-----------------------------------
Tax Obligation/Limited 29.5%
-----------------------------------
Tax Obligation/General 17.5%
-----------------------------------
U.S. Guaranteed 15.8%
-----------------------------------
Health Care 15.0%
-----------------------------------
Water and Sewer 7.0%
-----------------------------------
Consumer Staples 4.9%
-----------------------------------
Other 10.3%
-----------------------------------
1 Taxable-Equivalent Yield represents the yield that must be earned on a fully
taxable investment in order to equal the yield of the Fund on an after-tax
basis. It is based on a combined federal and state income tax rate of 34.7%.
When comparing this Fund to investments that generate qualified dividend income,
the Taxable-Equivalent Yield is lower.
2 The Fund paid shareholders a capital gains distribution in December 2006 of
$0.0308 per share.
14
NAC
Performance
OVERVIEW
Nuveen California Dividend Advantage Municipal Fund
as of August 31, 2007
Pie Chart:
Credit Quality (as a % of total investments)
AAA/U.S.
Guaranteed 68%
AA 6%
A 11%
BBB 7%
BB or Lower 1%
N/R 7%
Bar Chart:
2006-2007 Monthly Tax-Free Dividends Per Share2
Sep 0.0675
Oct 0.0675
Nov 0.0675
Dec 0.0675
Jan 0.0675
Feb 0.0675
Mar 0.065
Apr 0.065
May 0.065
Jun 0.065
Jul 0.065
Aug 0.065
Line Chart:
Share Price Performance -- Weekly Closing Price
9/01/06 15.88
15.69
15.74
15.8
16
15.9
15.66
15.71
15.62
15.72
15.6
15.68
15.87
16.24
16.21
15.67
15.67
15.9
15.73
15.7801
16.02
16.01
16
16.03
15.84
15.89
15.87
15.78
15.64
15.75
15.91
15.77
15.47
15.54
15.74
15.96
15.95
15.95
15.8301
16
15.66
15.54
15.4
15.09
14.84
14.54
14.38
14.2
14.32
14.258
14.09
14.3
8/31/07 14.3399
FUND SNAPSHOT
-----------------------------------
Common Share Price $14.34
-----------------------------------
Common Share
Net Asset Value $14.93
-----------------------------------
Premium/(Discount) to NAV -3.95%
-----------------------------------
Market Yield 5.44%
-----------------------------------
Taxable-Equivalent Yield1 8.33%
-----------------------------------
Net Assets Applicable to
Common Shares ($000) $350,523
-----------------------------------
Average Effective Maturity
on Securities (Years) 16.37
-----------------------------------
Leverage-Adjusted Duration 10.22
-----------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 5/26/99)
-----------------------------------
ON SHARE PRICE ON NAV
-----------------------------------
1-Year -5.19% 1.16%
-----------------------------------
5-Year 6.12% 5.86%
-----------------------------------
Since
Inception 5.73% 6.72%
-----------------------------------
INDUSTRIES
(as a % of total investments)
-----------------------------------
U.S. Guaranteed 26.7%
-----------------------------------
Tax Obligation/Limited 16.9%
-----------------------------------
Transportation 12.7%
-----------------------------------
Health Care 10.5%
-----------------------------------
Tax Obligation/General 8.6%
-----------------------------------
Water and Sewer 5.7%
-----------------------------------
Utilities 5.1%
-----------------------------------
Other 13.8%
-----------------------------------
1 Taxable-Equivalent Yield represents the yield that must be earned on a fully
taxable investment in order to equal the yield of the Fund on an after-tax
basis. It is based on a combined federal and state income tax rate of 34.7%.
When comparing this Fund to investments that generate qualified dividend income,
the Taxable-Equivalent Yield is lower.
2 The Fund paid shareholders a capital gains distribution in December 2006 of
$0.0533 per share.
15
NVX
Performance
OVERVIEW
Nuveen California Dividend Advantage Municipal Fund 2
as of August 31, 2007
Pie Chart:
Credit Quality (as a % of total investments)
AAA/U.S.
Guaranteed 68%
AA 5%
A 12%
BBB 8%
BB or Lower 1%
N/R 6%
Bar Chart:
2006-2007 Monthly Tax-Free Dividends Per Share
Sep 0.0655
Oct 0.0655
Nov 0.0655
Dec 0.0655
Jan 0.0655
Feb 0.0655
Mar 0.063
Apr 0.063
May 0.063
Jun 0.06
Jul 0.06
Aug 0.06
Line Chart:
Share Price Performance -- Weekly Closing Price
9/01/06 14.99
15.07
15.02
15.22
15.25
15.03
14.97
14.81
14.91
15.18
15.14
15.29
15.15
15.37
15.34
15.12
15.25
15.49
15.4
15.31
15.13
15.2001
15.46
15.4
15.23
15.12
15.14
15.16
15.15
15.25
15.43
15.5899
15.32
15.41
15.45
15.5
15.44
15.3
15.16
15.32
15.0101
14.37
14.19
14.3
14.07
13.96
13.72
13.77
13.73
13.73
13.25
13.56
8/31/07 13.73
FUND SNAPSHOT
-----------------------------------
Common Share Price $13.73
-----------------------------------
Common Share
Net Asset Value $14.69
-----------------------------------
Premium/(Discount) to NAV -6.54%
-----------------------------------
Market Yield 5.24%
-----------------------------------
Taxable-Equivalent Yield1 8.02%
-----------------------------------
Net Assets Applicable
to Common Shares ($000) $217,332
-----------------------------------
Average Effective Maturity
on Securities (Years) 14.99
-----------------------------------
Leverage-Adjusted Duration 10.81
-----------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 3/27/01)
-----------------------------------
ON SHARE PRICE ON NAV
-----------------------------------
1-Year -3.39% 0.46%
-----------------------------------
5-Year 5.42% 5.77%
-----------------------------------
Since
Inception 4.69% 6.27%
-----------------------------------
INDUSTRIES
(as a % of total investments)
-----------------------------------
U.S. Guaranteed 27.6%
-----------------------------------
Tax Obligation/Limited 15.5%
-----------------------------------
Health Care 13.4%
-----------------------------------
Education and
Civic Organizations 8.2%
-----------------------------------
Water and Sewer 6.9%
-----------------------------------
Transportation 6.8%
-----------------------------------
Housing/Multifamily 6.6%
-----------------------------------
Tax Obligation/General 5.3%
-----------------------------------
Other 9.7%
-----------------------------------
1 Taxable-Equivalent Yield represents the yield that must be earned on a fully
taxable investment in order to equal the yield of the Fund on an after-tax
basis. It is based on a combined federal and state income tax rate of 34.7%.
When comparing this Fund to investments that generate qualified dividend income,
the Taxable-Equivalent Yield is lower.
16
NZH
Performance
OVERVIEW
Nuveen California Dividend Advantage Municipal Fund 3
as of August 31, 2007
Pie Chart:
Credit Quality (as a % of total investments)
AAA/U.S.
Guaranteed 64%
AA 6%
A 14%
BBB 9%
BB or Lower 1%
N/R 6%
Bar Chart:
2006-2007 Monthly Tax-Free Dividends Per Share
Sep 0.0655
Oct 0.0655
Nov 0.0655
Dec 0.0655
Jan 0.0655
Feb 0.0655
Mar 0.063
Apr 0.063
May 0.063
Jun 0.059
Jul 0.059
Aug 0.059
Line Chart:
Share Price Performance -- Weekly Closing Price
9/01/06 14.78
14.93
14.82
14.94
14.86
14.96
14.7
14.92
14.95
14.98
15.01
15.07
15.1
15.14
15.15
15.08
15.25
15.5
15.32
15.25
15.21
15.15
15.23
15.2801
15.05
15.05
15.18
15.23
15.15
15.19
15.26
15.3
15.15
15.23
15.19
15.34
15.36
15.22
15.15
15.21
14.559
14.22
14.03
13.96
13.92
13.7
13.62
13.6
13.65
13.57
13.19
13.4
8/31/07 13.52
FUND SNAPSHOT
-----------------------------------
Common Share Price $13.52
-----------------------------------
Common Share
Net Asset Value $14.25
-----------------------------------
Premium/(Discount) to NAV -5.12%
-----------------------------------
Market Yield 5.24%
-----------------------------------
Taxable-Equivalent Yield1 8.02%
-----------------------------------
Net Assets Applicable to
Common Shares ($000) $343,806
-----------------------------------
Average Effective Maturity
on Securities (Years) 18.13
-----------------------------------
Leverage-Adjusted Duration 10.71
-----------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 9/25/01)
-----------------------------------
ON SHARE PRICE ON NAV
-----------------------------------
1-Year -4.12% -0.32%
-----------------------------------
5-Year 5.47% 5.71%
-----------------------------------
Since
Inception 4.29% 5.71%
-----------------------------------
INDUSTRIES
(as a % of total investments)
-----------------------------------
Tax Obligation/Limited 25.3%
-----------------------------------
Health Care 17.3%
-----------------------------------
U.S. Guaranteed 17.0%
-----------------------------------
Tax Obligation/General 12.5%
-----------------------------------
Water and Sewer 7.4%
-----------------------------------
Transportation 4.5%
-----------------------------------
Housing/Multifamily 4.3%
-----------------------------------
Other 11.7%
-----------------------------------
1 Taxable-Equivalent Yield represents the yield that must be earned on a fully
taxable investment in order to equal the yield of the Fund on an after-tax
basis. It is based on a combined federal and state income tax rate of 34.7%.
When comparing this Fund to investments that generate qualified dividend income,
the Taxable-Equivalent Yield is lower.
17
NKL
Performance
OVERVIEW
Nuveen Insured California Dividend Advantage Municipal Fund
as of August 31, 2007
Pie Chart:
Credit Quality (as a % of total investments)
Insured 74%
U.S. Guaranteed 15%
GNMA/FNMA Guaranteed 1%
A (Uninsured) 3%
BBB (Uninsured) 7%
Bar Chart:
2006-2007 Monthly Tax-Free Dividends Per Share2
Sep 0.065
Oct 0.065
Nov 0.065
Dec 0.065
Jan 0.065
Feb 0.065
Mar 0.065
Apr 0.065
May 0.065
Jun 0.062
Jul 0.062
Aug 0.062
Line Chart:
Share Price Performance -- Weekly Closing Price
9/01/06 15.64
15.38
15.35
15.53
15.7
15.71
15.64
15.69
15.55
15.58
15.61
15.47
15.5
15.71
15.98
15.52
15.68
15.82
15.67
15.63
15.54
15.4
15.48
15.44
15.4
15.31
15.45
15.72
15.65
15.87
15.9
15.94
15.76
15.84
16
16.1
15.95
15.8499
15.79
15.76
15.2299
15.1
15.1
14.98
14.95
14.72
14.25
14
14.3799
14.23
13.73
14.24
8/31/07 14.24
FUND SNAPSHOT
-----------------------------------
Common Share Price $14.24
-----------------------------------
Common Share
Net Asset Value $14.91
-----------------------------------
Premium/(Discount) to NAV -4.49%
-----------------------------------
Market Yield 5.22%
-----------------------------------
Taxable-Equivalent Yield1 7.99%
-----------------------------------
Net Assets Applicable to
Common Shares ($000) $227,923
-----------------------------------
Average Effective Maturity
on Securities (Years) 17.54
-----------------------------------
Leverage-Adjusted Duration 8.94
-----------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 3/25/02)
-----------------------------------
ON SHARE PRICE ON NAV
-----------------------------------
1-Year -4.64% 1.13%
-----------------------------------
5-Year 5.23% 5.80%
-----------------------------------
Since
Inception 5.19% 6.79%
-----------------------------------
INDUSTRIES
(as a % of total investments)
-----------------------------------
Tax Obligation/Limited 32.2%
-----------------------------------
Tax Obligation/General 16.1%
-----------------------------------
U.S. Guaranteed 15.1%
-----------------------------------
Utilities 11.0%
-----------------------------------
Water and Sewer 9.9%
-----------------------------------
Health Care 3.7%
-----------------------------------
Other 12.0%
-----------------------------------
1 Taxable-Equivalent Yield represents the yield that must be earned on a fully
taxable investment in order to equal the yield of the Fund on an after-tax
basis. It is based on a combined federal and state income tax rate of 34.7%.
When comparing this Fund to investments that generate qualified dividend income,
the Taxable-Equivalent Yield is lower.
2 The Fund paid shareholders a capital gains distribution in December 2006 of
$0.0026 per share.
18
NKX
Performance
OVERVIEW
Nuveen Insured California Tax-Free Advantage Municipal Fund
as of August 31, 2007
Pie Chart:
Credit Quality (as a % of total investments)
Insured 69%
U.S. Guaranteed 19%
A (Uninsured) 5%
BBB (Uninsured) 7%
Bar Chart:
2006-2007 Monthly Tax-Free Dividends Per Share
Sep 0.059
Oct 0.059
Nov 0.059
Dec 0.059
Jan 0.059
Feb 0.059
Mar 0.059
Apr 0.059
May 0.059
Jun 0.059
Jul 0.059
Aug 0.059
Line Chart:
Share Price Performance -- Weekly Closing Price
9/01/06 14.25
14.33
14.52
14.56
14.5
14.62
14.31
14.22
14.34
14.5
14.65
14.45
14.6
14.68
14.85
14.8
15.09
15.01
15.03
15.22
15
15.44
15.0016
14.95
14.77
14.67
15.0099
15.11
15.22
14.78
14.93
15.09
15.4
15.57
15.48
15.2
15.34
14.97
14.86
15.31
15
14.646
14.6
14.55
14.25
14.76
14.5
14.05
14.3
14.42
13.904
14.1
8/31/07 14.47
FUND SNAPSHOT
-----------------------------------
Common Share Price $14.47
-----------------------------------
Common Share
Net Asset Value $14.47
-----------------------------------
Premium/(Discount) to NAV --%
-----------------------------------
Market Yield 4.89%
-----------------------------------
Taxable-Equivalent Yield1 7.49%
-----------------------------------
Net Assets Applicable to
Common Shares ($000) $85,144
-----------------------------------
Average Effective Maturity
on Securities (Years) 17.53
-----------------------------------
Leverage-Adjusted Duration 9.94
-----------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 11/21/02)
-----------------------------------
ON SHARE PRICE ON NAV
-----------------------------------
1-Year 6.35% 1.69%
-----------------------------------
Since
Inception 4.88% 5.78%
-----------------------------------
INDUSTRIES
(as a % of total investments)
-----------------------------------
Tax Obligation/Limited 29.9%
-----------------------------------
U.S. Guaranteed 18.9%
-----------------------------------
Tax Obligation/General 18.0%
-----------------------------------
Water and Sewer 9.1%
-----------------------------------
Health Care 7.6%
-----------------------------------
Transportation 6.6%
-----------------------------------
Other 9.9%
-----------------------------------
1 Taxable-Equivalent Yield represents the yield that must be earned on a fully
taxable investment in order to equal the yield of the Fund on an after-tax
basis. It is based on a combined federal and state income tax rate of 34.7%.
When comparing this Fund to investments that generate qualified dividend income,
the Taxable-Equivalent Yield is lower.
19
Report of
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
THE BOARDS OF DIRECTORS/TRUSTEES AND SHAREHOLDERS
NUVEEN INSURED CALIFORNIA PREMIUM INCOME MUNICIPAL FUND, INC.
NUVEEN INSURED CALIFORNIA PREMIUM INCOME MUNICIPAL FUND 2, INC.
NUVEEN CALIFORNIA PREMIUM INCOME MUNICIPAL FUND
NUVEEN CALIFORNIA DIVIDEND ADVANTAGE MUNICIPAL FUND
NUVEEN CALIFORNIA DIVIDEND ADVANTAGE MUNICIPAL FUND 2
NUVEEN CALIFORNIA DIVIDEND ADVANTAGE MUNICIPAL FUND 3
NUVEEN INSURED CALIFORNIA DIVIDEND ADVANTAGE MUNICIPAL FUND
NUVEEN INSURED CALIFORNIA TAX-FREE ADVANTAGE MUNICIPAL FUND
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Nuveen Insured California Premium Income
Municipal Fund, Inc., Nuveen Insured California Premium Income Municipal Fund 2,
Inc., Nuveen California Premium Income Municipal Fund, Nuveen California
Dividend Advantage Municipal Fund, Nuveen California Dividend Advantage
Municipal Fund 2, Nuveen California Dividend Advantage Municipal Fund 3, Nuveen
Insured California Dividend Advantage Municipal Fund and Nuveen Insured
California Tax-Free Advantage Municipal Fund (the "Funds"), as of August 31,
2007, and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the periods indicated therein.
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Funds' internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Funds' internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of August 31, 2007, by correspondence with the custodian and
brokers or by other appropriate auditing procedures where replies from brokers
were not received. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of
Nuveen Insured California Premium Income Municipal Fund, Inc., Nuveen Insured
California Premium Income Municipal Fund 2, Inc., Nuveen California Premium
Income Municipal Fund, Nuveen California Dividend Advantage Municipal Fund,
Nuveen California Dividend Advantage Municipal Fund 2, Nuveen California
Dividend Advantage Municipal Fund 3, Nuveen Insured California Dividend
Advantage Municipal Fund and Nuveen Insured California Tax-Free Advantage
Municipal Fund at August 31, 2007, the results of their operations for the year
then ended, the changes in their net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
indicated therein in conformity with U.S. generally accepted accounting
principles.
/s/ Ernst & Young LLP
Chicago, Illinois
October 18, 2007
20
NPC
Nuveen Insured California Premium Income Municipal Fund, Inc.
Portfolio of INVESTMENTS
August 31, 2007
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 8.0% (5.4% OF TOTAL INVESTMENTS)
$ 2,125 California Educational Facilities Authority, Student Loan Revenue 3/08 at 102.00 Aaa $ 2,170,156
Bonds, Cal Loan Program, Series 2001A, 5.400%, 3/01/21 -
MBIA Insured (Alternative Minimum Tax)
2,500 California State University, Systemwide Revenue Bonds, 5/14 at 100.00 AAA 2,640,400
Series 2004A, 5.000%, 11/01/18 - FSA Insured
1,500 California State University, Systemwide Revenue Bonds, 5/15 at 100.00 AAA 1,546,620
Series 2005A, 5.000%, 11/01/25 - AMBAC Insured
1,500 University of California System, General Revenue Bonds, 5/15 at 101.00 AAA 1,408,395
Series 2006J, 4.500%, 5/15/35 - FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
7,625 Total Education and Civic Organizations 7,765,571
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 4.8% (3.2% OF TOTAL INVESTMENTS)
3,000 California Health Facilities Financing Authority, Insured Revenue 8/08 at 101.00 AAA 3,065,430
Bonds, Sutter Health, Series 1998A, 5.375%, 8/15/30 -
MBIA Insured
1,500 California Statewide Community Development Authority, 8/09 at 101.00 AAA 1,564,275
Certificates of Participation, Sutter Health Obligated Group,
Series 1999, 5.500%, 8/15/19 - FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
4,500 Total Health Care 4,629,705
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 0.3% (0.2% OF TOTAL INVESTMENTS)
225 California Housing Finance Agency, Home Mortgage Revenue 2/16 at 100.00 AAA 235,366
Bonds, Series 2006H, 5.750%, 8/01/30 - FGIC Insured
(Alternative Minimum Tax)
110 California Housing Finance Agency, Single Family Mortgage 2/08 at 101.00 AAA 111,285
Bonds II, Series 1997A-1, 6.000%, 8/01/20 - MBIA Insured
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
335 Total Housing/Single Family 346,651
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 31.6% (21.5% OF TOTAL INVESTMENTS)
Bonita Unified School District, San Diego County, California,
General Obligation Bonds, Series 2004A:
1,890 5.250%, 8/01/23 - MBIA Insured 8/14 at 100.00 AAA 1,994,744
1,250 5.250%, 8/01/25 - MBIA Insured 8/14 at 100.00 AAA 1,313,938
2,000 California, General Obligation Veterans Welfare Bonds, 12/07 at 101.00 AAA 2,000,200
Series 2001BZ, 5.375%, 12/01/24 - MBIA Insured
(Alternative Minimum Tax)
El Segundo Unified School District, Los Angeles County,
California, General Obligation Bonds, Series 2004:
2,580 5.250%, 9/01/21 - FGIC Insured 9/14 at 100.00 AAA 2,757,659
1,775 5.250%, 9/01/22 - FGIC Insured 9/14 at 100.00 AAA 1,889,346
1,225 Fresno Unified School District, Fresno County, California, General 2/13 at 103.00 AAA 1,409,608
Obligation Refunding Bonds, Series 1998A, 6.550%, 8/01/20 -
MBIA Insured
1,180 Jurupa Unified School District, Riverside County, California, 8/13 at 100.00 AAA 1,223,518
General Obligation Bonds, Series 2004, 5.000%, 8/01/21 -
FGIC Insured
1,130 Los Angeles Community College District, Los Angeles County, 8/15 at 100.00 AAA 1,171,426
California, General Obligation Bonds, Series 2005A,
5.000%, 8/01/24 - FSA Insured
3,000 Pomona Unified School District, Los Angeles County, California, 8/11 at 103.00 AAA 3,371,490
General Obligation Refunding Bonds, Series 1997A,
6.500%, 8/01/19 - MBIA Insured
21
NPC
Nuveen Insured California Premium Income Municipal Fund, Inc. (continued)
Portfolio of INVESTMENTS August 31, 2007
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL (continued)
$ 160 Roseville Joint Union High School District, Placer County, 8/15 at 100.00 AAA $ 165,003
California, General Obligation Bonds, Series 2006B,
5.000%, 8/01/27 - FGIC Insured
3,000 Sacramento City Unified School District, Sacramento County, 7/15 at 100.00 Aaa 3,092,940
California, General Obligation Bonds, Series 2005,
5.000%, 7/01/27 - MBIA Insured
San Diego Unified School District, San Diego County, California,
General Obligation Bonds, Election of 1998, Series 2001C:
1,335 5.000%, 7/01/21 - FSA Insured 7/11 at 102.00 AAA 1,415,901
3,500 5.000%, 7/01/22 - FSA Insured 7/11 at 102.00 AAA 3,712,100
4,895 5.000%, 7/01/23 - FSA Insured 7/11 at 102.00 AAA 5,191,637
------------------------------------------------------------------------------------------------------------------------------------
28,920 Total Tax Obligation/General 30,709,510
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 29.0% (19.7% OF TOTAL INVESTMENTS)
1,000 Brea and Olinda Unified School District, Orange County, 8/11 at 101.00 AAA 1,021,060
California, Certificates of Participation Refunding,
Series 2002A, 5.125%, 8/01/26 - FSA Insured
California Infrastructure Economic Development Bank, Revenue
Bonds, North County Center for Self-Sufficiency Corporation,
Series 2004:
1,215 5.000%, 12/01/19 - AMBAC Insured 12/13 at 100.00 AAA 1,260,162
1,615 5.000%, 12/01/21 - AMBAC Insured 12/13 at 100.00 AAA 1,663,337
195 Capistrano Unified School District, Orange County, California, 9/15 at 100.00 AAA 201,160
Special Tax Bonds, Community Facilities District, Series 2005,
5.000%, 9/01/24 - FGIC Insured
595 Chino Redevelopment Agency, California, Merged Chino 9/16 at 101.00 AAA 611,743
Redevelopment Project Area Tax Allocation Bonds, Series 2006,
5.000%, 9/01/38 - AMBAC Insured
1,900 Corona-Norco Unified School District, Riverside County, 9/12 at 100.00 AAA 1,947,975
California, Special Tax Bonds, Community Facilities District 98-1,
Series 2002, 5.100%, 9/01/25 - AMBAC Insured
5,000 El Monte, California, Senior Lien Certificates of Participation, 1/11 at 100.00 AAA 5,079,750
Department of Public Services Facility Phase II, Series 2001,
5.250%, 1/01/34 - AMBAC Insured
2,050 Golden State Tobacco Securitization Corporation, California, 6/15 at 100.00 AAA 2,269,863
Enhanced Tobacco Settlement Revenue Bonds, Drivers
Trust 2091, 7.092%, 6/01/45 - AGC Insured (IF)
1,000 Hesperia Public Financing Authority, California, Redevelopment 9/17 at 100.00 Aaa 984,700
and Housing Projects Tax Allocation Bonds, Series 2007A,
5.000%, 9/01/37 (WI/DD, Settling 9/12/07) - XLCA Insured
435 Indian Wells Redevelopment Agency, California, Tax Allocation 9/13 at 100.00 AAA 450,743
Bonds, Consolidated Whitewater Project Area, Series 2003A,
5.000%, 9/01/20 - AMBAC Insured
345 Los Angeles Community Redevelopment Agency, California, 9/15 at 100.00 Aaa 347,146
Lease Revenue Bonds, Manchester Social Services Project,
Series 2005, 5.000%, 9/01/37 - AMBAC Insured
895 Los Angeles Community Redevelopment Agency, California, 12/14 at 100.00 AAA 929,377
Tax Allocation Bonds, Bunker Hill Project, Series 2004A,
5.000%, 12/01/20 - FSA Insured
1,500 Los Angeles, California, Municipal Improvement Corporation, 1/17 at 100.00 AAA 1,471,890
Lease Revenue Bonds, Police Headquarters, Series 2006A,
4.750%, 1/01/31 - FGIC Insured
165 Rialto Redevelopment Agency, California, Tax Allocation Bonds, 9/15 at 100.00 AAA 167,117
Merged Project Area, Series 2005A, 5.000%, 9/01/35 -
XLCA Insured
205 Roseville, California, Certificates of Participation, Public 8/13 at 100.00 AAA 208,401
Facilities, Series 2003A, 5.000%, 8/01/25 - AMBAC Insured
3,000 Santa Clara County Financing Authority, California, Lease 11/07 at 102.00 AAA 3,061,290
Revenue Bonds, VMC Facility Replacement Project,
Series 1997A, 5.000%, 11/15/22 - AMBAC Insured
3,565 Sweetwater Union High School District Public Financing Authority, 9/15 at 100.00 AAA 3,641,612
California, Special Tax Revenue Bonds, Series 2005A,
5.000%, 9/01/25 - FSA Insured
2,805 Yucaipa-Calimesa Joint Unified School District, San Bernardino 10/11 at 100.00 AAA 2,828,057
County, California, General Obligation Refunding Bonds,
Series 2001A, 5.000%, 10/01/31 - MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
27,485 Total Tax Obligation/Limited 28,145,383
------------------------------------------------------------------------------------------------------------------------------------
22
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 2.5% (1.7% OF TOTAL INVESTMENTS)
$ 2,400 San Diego Unified Port District, California, Revenue Bonds, 9/14 at 100.00 AAA $ 2,444,688
Series 2004B, 5.000%, 9/01/29 - MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 46.5% (31.6% OF TOTAL INVESTMENTS) (4)
2,000 California State Public Works Board, Lease Revenue Bonds, 11/09 at 101.00 AAA 2,107,900
Department of Health Services, Series 1999A, 5.750%, 11/01/24
(Pre-refunded 11/01/09) - MBIA Insured
California, Various Purpose General Obligation Bonds, Series 2000:
7,995 5.750%, 3/01/22 (Pre-refunded 3/01/10) - MBIA Insured 3/10 at 101.00 AAA 8,479,896
2,000 5.750%, 3/01/27 (Pre-refunded 3/01/10) - MBIA Insured 3/10 at 101.00 AAA 2,121,300
2,500 Fresno Unified School District, Fresno County, California, General 8/09 at 102.00 AAA 2,591,775
Obligation Bonds, Series 2001A, 5.125%, 8/01/26 -
FSA Insured (ETM)
6,000 Huntington Park Redevelopment Agency, California, Single Family No Opt. Call AAA 8,113,559
Residential Mortgage Revenue Refunding Bonds, Series 1986A,
8.000%, 12/01/19 (ETM)
5,135 Palmdale Community Redevelopment Agency, California, Single No Opt. Call AAA 6,560,989
Family Restructured Mortgage Revenue Bonds, Series 1986A,
8.000%, 3/01/16 (Alternative Minimum Tax) (ETM)
6,220 Riverside County, California, GNMA Mortgage-Backed Securities No Opt. Call AAA 8,937,454
Program Single Family Mortgage Revenue Bonds, Series 1987A,
9.000%, 5/01/21 (Alternative Minimum Tax) (ETM)
1,485 San Jose, California, Single Family Mortgage Revenue Bonds, No Opt. Call AAA 1,936,574
Series 1985A, 9.500%, 10/01/13 (ETM)
2,150 Santa Clara Valley Water District, California, Water Utility 6/10 at 100.00 AAA 2,236,430
System Revenue Bonds, Series 2000A, 5.125%, 6/01/31
(Pre-refunded 6/01/10) - FGIC Insured
2,000 University of California, Revenue Bonds, Multi-Purpose Projects, 9/10 at 101.00 AAA 2,106,780
Series 2002O, 5.125%, 9/01/31 (Pre-refunded 9/01/10) -
FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
37,485 Total U.S. Guaranteed 45,192,657
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 0.4% (0.3% OF TOTAL INVESTMENTS)
345 Merced Irrigation District, California, Electric System Revenue 9/15 at 100.00 AAA 353,411
Bonds, Series 2005, 5.125%, 9/01/31 - XLCA Insured
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 24.1% (16.4% OF TOTAL INVESTMENTS)
5,255 El Dorado Irrigation District, California, Water and Sewer 3/13 at 100.00 AAA 5,439,450
Certificates of Participation, Series 2003A, 5.000%, 3/01/20 -
FGIC Insured
1,230 El Dorado Irrigation District, California, Water and Sewer 3/14 at 100.00 AAA 1,268,868
Certificates of Participation, Series 2004A, 5.000%, 3/01/21 -
FGIC Insured
235 Healdsburg Public Financing Authority, California, Wastewater 4/16 at 100.00 AAA 240,006
Revenue Bonds, Series 2006, 5.000%, 4/01/36 - MBIA Insured
5,000 Indio Water Authority, California, Water Revenue Bonds, 4/16 at 100.00 AAA 5,152,850
Series 2006, 5.000%, 4/01/31 - AMBAC Insured
220 Marina Coast Water District, California, Enterprise Certificate 6/16 at 100.00 AAA 223,491
of Participation, Series 2006, 5.000%, 6/01/31 - MBIA Insured
1,500 Placerville Public Financing Authority, California, Wastewater 9/16 at 100.00 AAA 1,521,930
System Refinancing and Improvement Project Revenue Bonds,
Series 2006, 5.000%, 9/01/34 - XLCA Insured
3,400 San Diego Public Facilities Financing Authority, California, 11/07 at 101.00 AAA 3,437,706
Sewerage Revenue Bonds, Series 1997A, 5.250%, 5/15/22 -
FGIC Insured
1,310 Santa Fe Springs Public Financing Authority, California, Water 5/13 at 100.00 AAA 1,344,663
Revenue Bonds, Series 2003A, 5.000%, 5/01/33 -
MBIA Insured
1,345 West Basin Municipal Water District, California, Revenue 8/13 at 100.00 AAA 1,398,666
Certificates of Participation, Series 2003A, 5.000%, 8/01/20 -
MBIA Insured
23
NPC
Nuveen Insured California Premium Income Municipal Fund, Inc. (continued)
Portfolio of INVESTMENTS August 31, 2007
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER (continued)
$ 2,000 Westlands Water District, California, Revenue Certificates of 3/15 at 100.00 AAA $ 2,053,460
Participation, Series 2005A, 5.000%, 9/01/30 - MBIA Insured
1,310 Wheeler Ridge-Maricopa Water District, Kern County, California, 11/07 at 101.00 AAA 1,336,593
Water Revenue Refunding Bonds, Series 1996,
5.700%, 11/01/15 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
22,805 Total Water and Sewer 23,417,683
------------------------------------------------------------------------------------------------------------------------------------
$ 131,900 Total Investments (cost $135,878,766) - 147.2% 143,005,259
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (0.9)% (828,879)
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (46.3)% (45,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 97,176,380
====================================================================================================================
FORWARD SWAPS OUTSTANDING AT AUGUST 31, 2007:
FUND FIXED RATE UNREALIZED
NOTIONAL PAY/RECEIVE FLOATING RATE FIXED RATE PAYMENT EFFECTIVE TERMINATION APPRECIATION
COUNTERPARTY AMOUNT FLOATING RATE INDEX (ANNUALIZED) FREQUENCY DATE (5) DATE (DEPRECIATION)
------------------------------------------------------------------------------------------------------------------------------------
Citigroup
Inc. $4,400,000 Pay 3-Month USD-LIBOR 5.808% Semi-Annually 7/01/08 7/01/33 $201,925
JPMorgan 6,000,000 Pay SIFM 4.376 Quarterly 8/06/08 8/06/37 162,803
------------------------------------------------------------------------------------------------------------------------------------
$364,728
====================================================================================================================================
USD-LIBOR (United States Dollar-London Inter-Bank Offered Rate)
SIFM - The daily arithmetic average of the weekly SIFM (the Securities Industry
and Financial Markets) Municipal Swap Index.
All of the bonds in the Portfolio of Investments are either
covered by Original Issue Insurance, Secondary Market
Insurance or Portfolio Insurance, or are backed by an escrow
or trust containing sufficient U.S. Government or U.S.
Government agency securities, any of which ensure the timely
payment of principal and interest.
(1) All percentages shown in the Portfolio of Investments are
based on net assets applicable to Common shares unless
otherwise noted.
(2) Optional Call Provisions (not covered by the report of
independent registered public accounting firm): Dates (month
and year) and prices of the earliest optional call or
redemption. There may be other call provisions at varying
prices at later dates. Certain mortgage-backed securities
may be subject to periodic principal paydowns.
(3) Ratings (not covered by the report of independent registered
public accounting firm): Using the higher of Standard &
Poor's or Moody's rating. Ratings below BBB by Standard &
Poor's Group or Baa by Moody's Investor Service, Inc. are
considered to be below investment grade.
(4) Backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities which ensure
the timely payment of principal and interest.
(5) Effective date represents the date on which both the Fund
and counterparty commence interest payment accruals on each
forward swap contract.
WI/DD Purchased on a when-issued or delayed delivery basis.
(ETM) Escrowed to maturity.
(IF) Inverse floating rate investment.
See accompanying notes to financial statements.
24
NCL
Nuveen Insured California Premium Income Municipal Fund 2, Inc.
Portfolio of INVESTMENTS
August 31, 2007
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 5.7% (3.8% OF TOTAL INVESTMENTS)
$ 620 California Educational Facilities Authority, Revenue Bonds, 11/10 at 100.00 Aaa $ 659,054
University of the Pacific, Series 2000, 5.875%, 11/01/20 -
MBIA Insured
2,125 California Educational Facilities Authority, Student Loan Revenue 3/08 at 102.00 Aaa 2,170,156
Bonds, Cal Loan Program, Series 2001A, 5.400%, 3/01/21 -
MBIA Insured (Alternative Minimum Tax)
1,500 California State University, Systemwide Revenue Bonds, 5/15 at 100.00 AAA 1,546,620
Series 2005A, 5.000%, 11/01/25 - AMBAC Insured
6,000 University of California, Revenue Bonds, Multi-Purpose Projects, 5/13 at 100.00 AAA 6,115,800
Series 2003A, 5.000%, 5/15/27 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
10,245 Total Education and Civic Organizations 10,491,630
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 3.9% (2.6% OF TOTAL INVESTMENTS)
7,000 The Regents of the University of California, Medical Center 5/15 at 101.00 AAA 6,476,260
Pooled Revenue Bonds, Series 2007A, 4.500%, 5/15/37 -
MBIA Insured
650 University of California, Hospital Revenue Bonds, UCLA Medical 5/12 at 101.00 AAA 699,290
Center, Series 2004A, 5.500%, 5/15/18 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
7,650 Total Health Care 7,175,550
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 2.3% (1.5% OF TOTAL INVESTMENTS)
435 California Housing Finance Agency, Home Mortgage Revenue 2/16 at 100.00 AAA 455,040
Bonds, Series 2006H, 5.750%, 8/01/30 - FGIC Insured
(Alternative Minimum Tax)
2,495 California Housing Finance Agency, Home Mortgage Revenue 2/16 at 100.00 AAA 2,587,889
Bonds, Series 2006K, 5.500%, 2/01/42 - AMBAC Insured
(Alternative Minimum Tax)
1,100 California Housing Finance Agency, Single Family Mortgage 2/08 at 101.50 AAA 1,113,552
Bonds, Series 1997C-2-II, 5.625%, 8/01/20 - MBIA Insured
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
4,030 Total Housing/Single Family 4,156,481
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 20.3% (13.7% OF TOTAL INVESTMENTS)
1,460 ABC Unified School District, Los Angeles County, California, 8/10 at 101.00 AAA 1,555,688
General Obligation Bonds, Series 2000B, 5.750%, 8/01/16 -
FGIC Insured
1,425 Bassett Unified School District, Los Angeles County, California, 8/16 at 100.00 AAA 1,494,725
General Obligation Bonds, Series 2006B, 5.250%, 8/01/30 -
FGIC Insured
4,400 California, General Obligation Bonds, Series 2003, 2/13 at 100.00 AAA 4,475,988
5.000%, 2/01/31 - MBIA Insured
3,000 California, General Obligation Veterans Welfare Bonds, 12/07 at 101.00 AAA 3,000,300
Series 2001BZ, 5.375%, 12/01/24 - MBIA Insured
(Alternative Minimum Tax)
1,910 Fresno Unified School District, Fresno County, California, No Opt. Call AAA 2,215,142
General Obligation Bonds, Series 2002A, 6.000%, 8/01/26 -
MBIA Insured
1,255 Los Angeles Community College District, Los Angeles County, 8/15 at 100.00 AAA 1,301,008
California, General Obligation Bonds, Series 2005A,
5.000%, 8/01/24 - FSA Insured
4,000 Los Angeles Unified School District, Los Angeles County, 7/17 at 100.00 AAA 3,946,320
California, General Obligation Bonds, Series 2007A,
4.500%, 7/01/24 - FSA Insured
25
NCL
Nuveen Insured California Premium Income Municipal Fund 2, Inc. (continued)
Portfolio of INVESTMENTS August 31, 2007
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL (continued)
Los Rios Community College District, Sacramento, El Dorado and
Yolo Counties, California, General Obligation Bonds, Series
2006C:
$ 2,110 5.000%, 8/01/21 - FSA Insured 8/14 at 102.00 AAA $ 2,206,912
3,250 5.000%, 8/01/22 - FSA Insured 8/14 at 102.00 AAA 3,387,540
3,395 5.000%, 8/01/23 - FSA Insured 8/14 at 102.00 AAA 3,526,013
1,270 Merced City School District, Merced County, California, General 8/13 at 100.00 AAA 1,307,935
Obligation Bonds, Series 2004, 5.000%, 8/01/22 - FGIC Insured
305 Roseville Joint Union High School District, Placer County, 8/15 at 100.00 AAA 314,537
California, General Obligation Bonds, Series 2006B,
5.000%, 8/01/27 - FGIC Insured
2,500 Sacramento City Unified School District, Sacramento County, 7/15 at 100.00 Aaa 2,577,450
California, General Obligation Bonds, Series 2005,
5.000%, 7/01/27 - MBIA Insured
1,125 San Diego Unified School District, California, General Obligation No Opt. Call AAA 594,045
Bonds, Election of 1998, Series 1999A, 0.000%, 7/01/21 -
FGIC Insured
2,000 San Francisco Community College District, California, General 6/10 at 102.00 Aaa 2,035,620
Obligation Bonds, Series 2002A, 5.000%, 6/15/26 -
FGIC Insured
1,000 San Ramon Valley Unified School District, Contra Costa County, 8/14 at 100.00 AAA 1,030,000
California, General Obligation Bonds, Series 2004,
5.000%, 8/01/24 - FSA Insured
2,445 Washington Unified School District, Yolo County, California, 8/13 at 100.00 AAA 2,535,172
General Obligation Bonds, Series 2004A, 5.000%, 8/01/21 -
FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
36,850 Total Tax Obligation/General 37,504,395
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 44.1% (29.7% OF TOTAL INVESTMENTS)
Anaheim Public Finance Authority, California, Subordinate Lease
Revenue Bonds, Public Improvement Project, Series 1997C:
5,130 0.000%, 9/01/18 - FSA Insured No Opt. Call AAA 3,128,428
8,000 0.000%, 9/01/21 - FSA Insured No Opt. Call AAA 4,129,360
California Infrastructure Economic Development Bank, Revenue
Bonds, North County Center for Self-Sufficiency Corporation,
Series 2004:
1,535 5.000%, 12/01/20 - AMBAC Insured 12/13 at 100.00 AAA 1,586,868
1,780 5.000%, 12/01/23 - AMBAC Insured 12/13 at 100.00 AAA 1,823,521
3,725 California State Public Works Board, Lease Revenue Bonds, 1/16 at 100.00 AAA 3,952,672
Department of Corrections & Rehabilitation, Series 2005J,
5.000%, 1/01/17 - AMBAC Insured
380 Capistrano Unified School District, Orange County, California, 9/15 at 100.00 AAA 392,004
Special Tax Bonds, Community Facilities District, Series 2005,
5.000%, 9/01/24 - FGIC Insured
6,000 El Monte, California, Senior Lien Certificates of Participation, 1/11 at 100.00 AAA 6,086,880
Department of Public Services Facility Phase II, Series 2001,
5.000%, 1/01/21 - AMBAC Insured
8,280 Fontana Public Financing Authority, California, Tax Allocation 10/15 at 100.00 AAA 8,427,301
Revenue Bonds, North Fontana Redevelopment Project,
Series 2005A, 5.000%, 10/01/32 - AMBAC Insured
3,000 Galt Schools Joint Powers Authority, Sacramento County, 11/07 at 102.00 AAA 3,069,990
California, Revenue Refunding Bonds, High School and
Elementary School Facilities, Series 1997A, 5.875%, 11/01/24 -
MBIA Insured
4,500 Golden State Tobacco Securitization Corporation, California, 6/15 at 100.00 AAA 4,606,875
Enhanced Tobacco Settlement Revenue Bonds, Residual
Series 2040, 6.450%, 6/01/45 - FGIC Insured (IF)
4,025 Golden State Tobacco Securitization Corporation, California, 6/15 at 100.00 AAA 4,456,681
Enhanced Tobacco Settlement Revenue Bonds, Drivers Trust
2091, 7.092%, 6/01/45 - AGC Insured (IF)
1,255 Hesperia Public Financing Authority, California, Redevelopment 9/17 at 100.00 Aaa 1,235,799
and Housing Projects Tax Allocation Bonds, Series 2007A,
5.000%, 9/01/37 (WI/DD, Settling 9/12/07) - XLCA Insured
1,700 Hesperia Unified School District, San Bernardino County, 2/17 at 100.00 AAA 1,710,710
California, Certificates of Participation, Capital Improvement,
Series 2007, 5.000%, 2/01/41 - AMBAC Insured
1,810 Kern County Board of Education, California, Certificates of 5/08 at 102.00 AAA 1,849,096
Participation Refunding, Series 1998A, 5.200%, 5/01/28 -
MBIA Insured
26
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED (continued)
$ 5,000 La Quinta Redevelopment Agency, California, Tax Allocation 9/07 at 102.00 AAA $ 5,095,750
Refunding Bonds, Redevelopment Project Area 1, Series 1998,
5.200%, 9/01/28 - AMBAC Insured
2,185 Los Angeles Community Redevelopment Agency, California, 9/15 at 100.00 Aaa 2,198,591
Lease Revenue Bonds, Manchester Social Services Project,
Series 2005, 5.000%, 9/01/37 - AMBAC Insured
1,000 Los Angeles Community Redevelopment Agency, California, 12/14 at 100.00 AAA 1,038,410
Tax Allocation Bonds, Bunker Hill Project, Series 2004A,
5.000%, 12/01/20 - FSA Insured
1,250 Los Angeles County Metropolitan Transportation Authority, 7/13 at 100.00 AAA 1,303,750
California, Proposition A First Tier Senior Sales Tax Revenue
Bonds, Series 2003B, 5.000%, 7/01/19 - MBIA Insured
4,000 Los Angeles, California, Certificates of Participation, Municipal 6/13 at 100.00 AAA 4,042,480
Improvement Corporation, Series 2003AW, 5.000%, 6/01/33 -
AMBAC Insured
3,000 Los Angeles, California, Municipal Improvement Corporation, 1/17 at 100.00 AAA 2,943,780
Lease Revenue Bonds, Police Headquarters, Series 2006A,
4.750%, 1/01/31 - FGIC Insured
4,140 Plumas County, California, Certificates of Participation, Capital 6/13 at 101.00 AAA 4,204,832
Improvement Program, Series 2003A, 5.000%, 6/01/28 -
AMBAC Insured
390 Poway Redevelopment Agency, California, Tax Allocation 12/10 at 102.00 AAA 417,284
Refunding Bonds, Paguay Redevelopment Project, Series 2000,
5.750%, 6/15/33 - MBIA Insured
325 Rialto Redevelopment Agency, California, Tax Allocation Bonds, 9/15 at 100.00 AAA 329,170
Merged Project Area, Series 2005A, 5.000%, 9/01/35 -
XLCA Insured
1,000 Rocklin Unified School District, Placer County, California, 9/13 at 100.00 AAA 1,023,400
Special Tax Bonds, Community Facilities District 1, Series 2004,
5.000%, 9/01/25 - MBIA Insured
405 Roseville, California, Certificates of Participation, Public 8/13 at 100.00 AAA 411,719
Facilities, Series 2003A, 5.000%, 8/01/25 - AMBAC Insured
5,000 San Bernardino Joint Powers Financing Authority, California, 9/09 at 102.00 AAA 5,264,400
Certificates of Participation Refunding, Police Station Financing
Project, Series 1999, 5.500%, 9/01/20 - MBIA Insured
5,510 Sweetwater Union High School District Public Financing Authority, 9/15 at 100.00 AAA 5,609,951
California, Special Tax Revenue Bonds, Series 2005A,
5.000%, 9/01/28 - FSA Insured
1,020 Washington Unified School District, Yolo County, California, 8/17 at 100.00 AAA 1,043,848
Certificates of Participation, Series 2007, 5.125%, 8/01/37 -
AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
85,345 Total Tax Obligation/Limited 81,383,550
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 7.1% (4.8% OF TOTAL INVESTMENTS)
6,500 Foothill/Eastern Transportation Corridor Agency, California, 1/10 at 65.32 AAA 3,845,530
Toll Road Revenue Refunding Bonds, Series 1999,
0.000%, 1/15/18 - MBIA Insured
4,000 Orange County Transportation Authority, California, Toll Road 8/13 at 100.00 AAA 4,189,520
Revenue Bonds, 91 Express Lanes Project, Series 2003A,
5.000%, 8/15/18 - AMBAC Insured
5,000 San Francisco Airports Commission, California, Revenue 5/11 at 100.00 AAA 5,041,050
Refunding Bonds, San Francisco International Airport,
Second Series 2001, Issue 27A, 5.250%, 5/01/31 -
MBIA Insured (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
15,500 Total Transportation 13,076,100
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 37.7% (25.3% OF TOTAL INVESTMENTS) (4)
1,380 California Educational Facilities Authority, Revenue Bonds, 11/10 at 100.00 Aaa 1,475,013
University of the Pacific, Series 2000, 5.875%, 11/01/20
(Pre-refunded 11/01/10) - MBIA Insured
California Infrastructure Economic Development Bank, Revenue
Bonds, Asian Art Museum of San Francisco, Series 2000:
1,295 5.500%, 6/01/19 (Pre-refunded 6/01/10) - MBIA Insured 6/10 at 101.00 AAA 1,372,467
1,000 5.500%, 6/01/20 (Pre-refunded 6/01/10) - MBIA Insured 6/10 at 101.00 AAA 1,059,820
3,450 California State Public Works Board, Lease Revenue Bonds, 11/09 at 101.00 AAA 3,636,128
Department of Health Services, Series 1999A,
5.750%, 11/01/24 (Pre-refunded 11/01/09) - MBIA Insured
2,250 California State, General Obligation Bonds, Series 2004, 4/14 at 100.00 Aaa 2,410,628
5.000%, 4/01/31 (Pre-refunded 4/01/14) - AMBAC Insured
27
NCL
Nuveen Insured California Premium Income Municipal Fund 2, Inc. (continued)
Portfolio of INVESTMENTS August 31, 2007
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED (4) (continued)
$ 2,500 California, Various Purpose General Obligation Bonds, Series 1999, 9/09 at 101.00 AAA $ 2,616,875
5.500%, 9/01/24 (Pre-refunded 9/01/09) - FSA Insured
California, Various Purpose General Obligation Bonds, Series 2000:
7,995 5.750%, 3/01/22 (Pre-refunded 3/01/10) - MBIA Insured 3/10 at 101.00 AAA 8,479,897
1,900 5.750%, 3/01/27 (Pre-refunded 3/01/10) - MBIA Insured 3/10 at 101.00 AAA 2,015,235
2,425 Central Unified School District, Fresno County, California, 9/07 at 100.00 AAA 2,449,759
General Obligation Bonds, Series 1993, 5.625%, 3/01/18 -
AMBAC Insured (ETM)
3,000 Escondido Union High School District, San Diego County, 11/07 at 101.00 AAA 3,039,720
California, General Obligation Bonds, Series 1996,
5.700%, 11/01/10 - MBIA Insured (ETM)
Fresno Unified School District, Fresno County, California, General
Obligation Bonds, Series 2001F:
1,065 5.125%, 8/01/21 - FSA Insured (ETM) 8/09 at 102.00 AAA 1,106,439
1,160 5.125%, 8/01/22 - FSA Insured (ETM) 8/09 at 102.00 AAA 1,205,136
1,220 5.125%, 8/01/23 - FSA Insured (ETM) 8/09 at 102.00 AAA 1,267,470
1,500 Hacienda La Puente Unified School District, Los Angeles County, 8/10 at 101.00 AAA 1,583,640
California, General Obligation Bonds, Series 2000A,
5.250%, 8/01/25 (Pre-refunded 8/01/10) - MBIA Insured
3,190 Kern County Board of Education, California, Certificates of 5/08 at 102.00 Aaa 3,287,072
Participation Refunding, Series 1998A, 5.200%, 5/01/28
(Pre-refunded 5/01/08) - MBIA Insured
1,750 Lake Tahoe Unified School District, El Dorado County, California, 8/09 at 100.00 AAA 1,806,403
General Obligation Bonds, Series 1999A, 5.250%, 8/01/24
(Pre-refunded 8/01/09) - FGIC Insured
3,865 Los Angeles County Metropolitan Transportation Authority, 7/10 at 101.00 AAA 4,075,952
California, Proposition C Second Senior Lien Sales Tax Revenue
Bonds, Series 2000A, 5.250%, 7/01/30 (Pre-refunded 7/01/10) -
FGIC Insured
Manteca Unified School District, San Joaquin County, California,
General Obligation Bonds, Series 2004:
1,000 5.250%, 8/01/21 (Pre-refunded 8/01/14) - FSA Insured 8/14 at 100.00 AAA 1,089,530
1,000 5.250%, 8/01/22 (Pre-refunded 8/01/14) - FSA Insured 8/14 at 100.00 AAA 1,089,530
2,500 Oakland, California, Insured Revenue Bonds, 1800 Harrison 1/10 at 100.00 AAA 2,635,575
Foundation - Kaiser Permanente, Series 1999A,
6.000%, 1/01/29 (Pre-refunded 1/01/10) - AMBAC Insured
2,775 Pomona Public Financing Authority, California, Revenue Bonds, 5/09 at 101.00 AAA 2,888,387
Water Facilities Project, Series 1999AC, 5.500%, 5/01/29
(Pre-refunded 5/01/09) - FGIC Insured
1,610 Poway Redevelopment Agency, California, Tax Allocation 12/10 at 102.00 Aaa 1,747,365
Refunding Bonds, Paguay Redevelopment Project, Series 2000,
5.750%, 6/15/33 (Pre-refunded 12/15/10) - MBIA Insured
3,500 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/12 at 101.00 AAA 3,758,475
Series 2002II, 5.125%, 7/01/26 (Pre-refunded 7/01/12) -
FSA Insured
4,320 Riverside County, California, GNMA Mortgage-Backed Securities No Opt. Call AAA 5,662,786
Program Single Family Mortgage Revenue Bonds, Series 1987B,
8.625%, 5/01/16 (Alternative Minimum Tax) (ETM)
1,690 Sacramento City Financing Authority, California, Capital 12/09 at 102.00 AAA 1,802,841
Improvement Revenue Bonds, Solid Waste and Redevelopment
Projects, Series 1999, 5.800%, 12/01/19 (Pre-refunded
12/01/09) - AMBAC Insured
1,000 Sacramento County Sanitation District Financing Authority, 12/10 at 101.00 AAA 1,068,060
California, Revenue Bonds, Series 2000A, 5.500%, 12/01/20
(Pre-refunded 12/01/10) - AMBAC Insured
3,500 San Francisco Bay Area Rapid Transit District, California, Sales 7/09 at 101.00 AAA 3,653,055
Tax Revenue Bonds, Series 1999, 5.500%, 7/01/34
(Pre-refunded 7/01/09) - FGIC Insured
1,105 University of California, Hospital Revenue Bonds, UCLA Medical 5/12 at 101.00 AAA 1,188,792
Center, Series 2004A, 5.500%, 5/15/18 (Pre-refunded 5/15/12) -
AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
64,945 Total U.S. Guaranteed 69,472,050
------------------------------------------------------------------------------------------------------------------------------------
28
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 7.9% (5.3% OF TOTAL INVESTMENTS)
$ 3,740 California Pollution Control Financing Authority, Revenue Refunding 9/09 at 101.00 AAA $ 3,867,272
Bonds, Southern California Edison Company, Series 1999B,
5.450%, 9/01/29 - MBIA Insured
670 Merced Irrigation District, California, Electric System Revenue 9/15 at 100.00 AAA 686,335
Bonds, Series 2005, 5.125%, 9/01/31 - XLCA Insured
100 Sacramento City Financing Authority, California, Capital 12/09 at 102.00 AAA 106,430
Improvement Revenue Bonds, Solid Waste and Redevelopment
Projects, Series 1999, 5.800%, 12/01/19 - AMBAC Insured
1,950 Salinas Valley Solid Waste Authority, California, Revenue Bonds, 8/12 at 100.00 AAA 1,983,677
Series 2002, 5.250%, 8/01/27 - AMBAC Insured
(Alternative Minimum Tax)
Santa Clara, California, Subordinate Electric Revenue Bonds,
Series 2003A:
2,800 5.000%, 7/01/24 - MBIA Insured 7/13 at 100.00 AAA 2,868,068
5,000 5.000%, 7/01/28 - MBIA Insured 7/13 at 100.00 AAA 5,085,650
------------------------------------------------------------------------------------------------------------------------------------
14,260 Total Utilities 14,597,432
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 19.8% (13.3% OF TOTAL INVESTMENTS)
2,975 Chino Basin Regional Finance Authority, California, Sewerage 2/08 at 100.00 AAA 2,980,593
System Revenue Bonds, Inland Empire Utilities Agency,
Series 1994, 6.000%, 8/01/16 - AMBAC Insured
2,000 El Dorado Irrigation District, California, Water and Sewer 3/14 at 100.00 AAA 2,063,200
Certificates of Participation, Series 2004A, 5.000%, 3/01/21 -
FGIC Insured
750 Fortuna Public Finance Authority, California, Water Revenue 10/16 at 100.00 AAA 771,758
Bonds, Series 2006, 5.000%, 10/01/36 - FSA Insured
460 Healdsburg Public Financing Authority, California, Wastewater 4/16 at 100.00 AAA 469,798
Revenue Bonds, Series 2006, 5.000%, 4/01/36 - MBIA Insured
2,700 Los Angeles County Sanitation Districts Financing Authority, 10/13 at 100.00 AAA 2,800,413
California, Senior Revenue Bonds, Capital Projects,
Series 2003A, 5.000%, 10/01/21 - FSA Insured
430 Marina Coast Water District, California, Enterprise Certificate 6/16 at 100.00 AAA 436,824
of Participation, Series 2006, 5.000%, 6/01/31 - MBIA Insured
12,000 Orange County Sanitation District, California, Certificates of 8/13 at 100.00 AAA 12,131,040
Participation, Series 2003, 5.000%, 2/01/33 - FGIC Insured
1,520 San Buenaventura, California, Water Revenue Certificates of 10/14 at 100.00 AAA 1,549,442
Participation, Series 2004, 5.000%, 10/01/25 - AMBAC Insured
3,675 San Dieguito Water District, California, Water Revenue Bonds, 10/14 at 100.00 AAA 3,792,012
Series 2004, 5.000%, 10/01/23 - FGIC Insured
Santa Clara Valley Water District, California, Certificates of
Participation, Series 2004A:
1,400 5.000%, 2/01/19 - FGIC Insured 2/14 at 100.00 AAA 1,448,370
445 5.000%, 2/01/20 - FGIC Insured 2/14 at 100.00 AAA 458,639
465 5.000%, 2/01/21 - FGIC Insured 2/14 at 100.00 AAA 477,164
2,500 West Basin Municipal Water District, California, Revenue 8/13 at 100.00 AAA 2,546,650
Certificates of Participation, Series 2003A, 5.000%, 8/01/30 -
MBIA Insured
Yorba Linda Water District, California, Certificates of Participation,
Highland Reservoir Renovation, Series 2003:
2,010 5.000%, 10/01/28 - FGIC Insured 10/13 at 100.00 AAA 2,045,758
2,530 5.000%, 10/01/33 - FGIC Insured 10/13 at 100.00 AAA 2,561,648
------------------------------------------------------------------------------------------------------------------------------------
35,860 Total Water and Sewer 36,533,309
------------------------------------------------------------------------------------------------------------------------------------
$ 274,685 Total Investments (cost $266,239,322) - 148.8% 274,390,497
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 2.7% 4,953,002
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (51.5)% (95,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 184,343,499
====================================================================================================================
29
NCL
Nuveen Insured California Premium Income Municipal Fund 2, Inc. (continued)
Portfolio of INVESTMENTS August 31, 2007
FORWARD SWAPS OUTSTANDING AT AUGUST 31, 2007:
FUND FIXED RATE UNREALIZED
NOTIONAL PAY/RECEIVE FLOATING RATE FIXED RATE PAYMENT EFFECTIVE TERMINATION APPRECIATION
COUNTERPARTY AMOUNT FLOATING RATE INDEX (ANNUALIZED) FREQUENCY DATE (5) DATE (DEPRECIATION)
------------------------------------------------------------------------------------------------------------------------------------
Citigroup
Inc. $ 7,500,000 Pay 3-Month USD-LIBOR 5.808% Semi-Annually 7/01/08 7/01/33 $344,190
JPMorgan 11,500,000 Pay SIFM 4.376 Quarterly 8/06/08 8/06/37 312,040
------------------------------------------------------------------------------------------------------------------------------------
$656,230
====================================================================================================================================
USD-LIBOR (United States Dollar-London Inter-Bank Offered Rate)
SIFM - The daily arithmetic average of the weekly SIFM (the Securities Industry
and Financial Markets) Municipal Swap Index.
The Fund may invest in "zero coupon" securities. A zero
coupon security does not pay a regular interest coupon to
its holders during the life of the security. Tax-exempt
income to the holder of the security comes from accretion of
the difference between the original purchase price of the
security at issuance and the par value of the security at
maturity and is effectively paid at maturity. Such
securities are included in the Portfolio of Investments with
a 0.000% coupon rate in their description. The market prices
of zero coupon securities generally are more volatile than
the market prices of securities that pay interest
periodically.
All of the bonds in the Portfolio of Investments are either
covered by Original Issue Insurance, Secondary Market
Insurance or Portfolio Insurance, or are backed by an escrow
or trust containing sufficient U.S. Government or U.S.
Government agency securities, any of which ensure the timely
payment of principal and interest.
(1) All percentages shown in the Portfolio of Investments are
based on net assets applicable to Common shares unless
otherwise noted.
(2) Optional Call Provisions (not covered by the report of
independent registered public accounting firm): Dates (month
and year) and prices of the earliest optional call or
redemption. There may be other call provisions at varying
prices at later dates. Certain mortgage-backed securities
may be subject to periodic principal paydowns.
(3) Ratings (not covered by the report of independent registered
public accounting firm): Using the higher of Standard &
Poor's or Moody's rating. Ratings below BBB by Standard &
Poor's Group or Baa by Moody's Investor Service, Inc. are
considered to be below investment grade.
(4) Backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities which ensure
the timely payment of principal and interest.
(5) Effective date represents the date on which both the Fund
and counterparty commence interest payment accruals on each
forward swap contract.
WI/DD Purchased on a when-issued or delayed delivery basis.
(ETM) Escrowed to maturity.
(IF) Inverse floating rate investment.
See accompanying notes to financial statements.
30
NCU
Nuveen California Premium Income Municipal Fund
Portfolio of INVESTMENTS
August 31, 2007
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 7.5% (4.9% OF TOTAL INVESTMENTS)
$ 1,500 California County Tobacco Securitization Agency, Tobacco 6/12 at 100.00 Baa3 $ 1,495,230
Settlement Asset-Backed Bonds, Alameda County Tobacco
Asset Securitization Corporation, Series 2002, 5.750%, 6/01/29
290 California County Tobacco Securitization Agency, Tobacco 6/15 at 100.00 BBB 268,868
Settlement Asset-Backed Bonds, Sonoma County Tobacco
Securitization Corporation, Series 2005, 4.250%, 6/01/21
3,445 California Statewide Financing Authority, Tobacco Settlement 5/12 at 100.00 Baa3 3,455,886
Asset-Backed Bonds, Pooled Tobacco Securitization Program,
Series 2002A, 5.625%, 5/01/29
1,350 Golden State Tobacco Securitization Corporation, California, 6/22 at 100.00 BBB 888,192
Enhanced Tobacco Settlement Asset-Backed Bonds,
Series 2007A-2, 0.000%, 6/01/37
------------------------------------------------------------------------------------------------------------------------------------
6,585 Total Consumer Staples 6,108,176
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 2.2% (1.4% OF TOTAL INVESTMENTS)
70 California Educational Facilities Authority, Revenue Bonds, 10/15 at 100.00 A3 68,753
University of Redlands, Series 2005A, 5.000%, 10/01/35
California Educational Facilities Authority, Revenue Bonds,
University of the Pacific, Series 2006:
45 5.000%, 11/01/21 11/15 at 100.00 A2 46,319
60 5.000%, 11/01/25 11/15 at 100.00 A2 61,022
1,500 University of California, Revenue Bonds, Multi-Purpose Projects, 5/13 at 100.00 AAA 1,599,900
Series 2003A, 5.125%, 5/15/17 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
1,675 Total Education and Civic Organizations 1,775,994
------------------------------------------------------------------------------------------------------------------------------------
ENERGY - 0.6% (0.4% OF TOTAL INVESTMENTS)
500 Virgin Islands Public Finance Authority, Revenue Bonds, 1/15 at 100.00 BBB 459,710
Refinery Project Hovensa LLC, Series 2007, 4.700%, 7/01/22
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 23.2% (15.0% OF TOTAL INVESTMENTS)
4,705 California Health Facilities Financing Authority, Hospital Revenue 11/07 at 100.00 BB 4,704,765
Bonds, Downey Community Hospital, Series 1993,
5.750%, 5/15/15
945 California Health Facilities Financing Authority, Revenue Bonds, 11/15 at 100.00 A2 940,058
Cedars-Sinai Medical Center, Series 2005, 5.000%, 11/15/34
3,525 California Health Facilities Financing Authority, Revenue Bonds, 11/16 at 100.00 AA- 3,588,062
Sutter Health, Series 2007A, 5.250%, 11/15/46 (UB)
1,500 California Infrastructure Economic Development Bank, Revenue 8/11 at 102.00 A+ 1,535,025
Bonds, Kaiser Hospital Assistance LLC, Series 2001A,
5.550%, 8/01/31
1,000 California Statewide Community Development Authority, 10/17 at 100.00 A+ 974,900
Insured Health Facility Revenue Bonds, Henry Mayo Newhall
Memorial Hospital, Series 2007A, 5.000%, 10/01/37
2,335 California Statewide Community Development Authority, 3/16 at 100.00 A+ 2,255,890
Revenue Bonds, Kaiser Permanante System, Series 2006,
5.000%, 3/01/41
730 California Statewide Community Development Authority, 8/16 at 100.00 A+ 736,950
Revenue Bonds, Kaiser Permanente System, Series 2001C,
5.250%, 8/01/31
1,000 California Statewide Community Development Authority, 4/17 at 100.00 A+ 925,380
Revenue Bonds, Kaiser Permanente System, Series 2007A,
4.750%, 4/01/33
31
NCU
Nuveen California Premium Income Municipal Fund (continued)
Portfolio of INVESTMENTS August 31, 2007
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE (continued)
$ 2,100 California Statewide Community Development Authority, No Opt. Call AAA $ 2,211,699
Revenue Bonds, Sherman Oaks Health System, Series 1998A,
5.000%, 8/01/22 - AMBAC Insured
1,000 The Regents of the University of California, Medical Center 5/15 at 101.00 AAA 925,180
Pooled Revenue Bonds, Series 2007A, 4.500%, 5/15/37 -
MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
18,840 Total Health Care 18,797,909
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 2.0% (1.3% OF TOTAL INVESTMENTS)
1,600 California Statewide Community Development Authority, Revenue 7/08 at 101.00 BBB 1,627,856
Refunding Bonds, Irvine Apartment Communities Development,
Series 1998A, 5.250%, 5/15/25 (Mandatory put 5/15/13)
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 0.5% (0.4% OF TOTAL INVESTMENTS)
200 California Housing Finance Agency, Home Mortgage Revenue 2/16 at 100.00 AAA 209,214
Bonds, Series 2006H, 5.750%, 8/01/30 - FGIC Insured
(Alternative Minimum Tax)
200 California Housing Finance Agency, Single Family Mortgage 2/08 at 101.00 AAA 202,336
Bonds II, Series 1997A-1, 6.000%, 8/01/20 - MBIA Insured
(Alternative Minimum Tax)
30 California Rural Home Mortgage Finance Authority, No Opt. Call AAA 30,502
Mortgage-Backed Securities Program Single Family Mortgage
Revenue Bonds, Series 1996C, 7.500%, 8/01/27
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
430 Total Housing/Single Family 442,052
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 0.6% (0.4% OF TOTAL INVESTMENTS)
500 California Pollution Control Financing Authority, Solid Waste 1/16 at 102.00 BBB 478,020
Disposal Revenue Bonds, Waste Management Inc.,
Series 2002A, 5.000%, 1/01/22 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 27.1% (17.5% OF TOTAL INVESTMENTS)
California, General Obligation Bonds, Series 2003:
1,000 5.250%, 11/01/19 - RAAI Insured 11/13 at 100.00 AA 1,056,300
1,500 5.000%, 2/01/31 - MBIA Insured 2/13 at 100.00 AAA 1,525,905
California, General Obligation Bonds, Series 2004:
1,750 5.000%, 4/01/22 4/14 at 100.00 A+ 1,797,810
1,400 5.200%, 4/01/26 4/14 at 100.00 A+ 1,448,552
4,000 California, General Obligation Veterans Welfare Bonds, 12/07 at 100.00 A1 4,001,080
Series 1999BR, 5.300%, 12/01/29 (Alternative Minimum Tax)
1,000 Fremont Unified School District, Alameda County, California, 8/12 at 101.00 AAA 1,036,880
General Obligation Bonds, Series 2002A, 5.000%, 8/01/21 -
FGIC Insured
6,000 Hartnell Community College District, California, General 6/16 at 100.00 AAA 6,199,260
Obligation Bonds, Series 2006B, 5.000%, 6/01/29 - FSA Insured
3,000 Pomona Unified School District, Los Angeles County, California, 8/11 at 103.00 AAA 3,343,320
General Obligation Refunding Bonds, Series 1997A,
6.150%, 8/01/15 - MBIA Insured
15 Riverside Community College District, California, General 8/14 at 100.00 AAA 15,961
Obligation Bonds, Series 2004A, 5.250%, 8/01/22 -
MBIA Insured
135 Roseville Joint Union High School District, Placer County, 8/15 at 100.00 AAA 139,221
California, General Obligation Bonds, Series 2006B,
5.000%, 8/01/27 - FGIC Insured
1,355 San Jose-Evergreen Community College District, Santa Clara 9/15 at 100.00 AAA 1,401,477
County, California, General Obligation Bonds, Series 2005A,
5.000%, 9/01/25 - MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
21,155 Total Tax Obligation/General 21,965,766
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 45.4% (29.5% OF TOTAL INVESTMENTS)
1,000 Bell Community Redevelopment Agency, California, Tax 10/13 at 100.00 AA 1,008,910
Allocation Bonds, Bell Project Area, Series 2003,
5.625%, 10/01/33 - RAAI Insured
California Infrastructure Economic Development Bank,
Revenue Bonds, North County Center for Self-Sufficiency
Corporation, Series 2004:
1,695 5.000%, 12/01/22 - AMBAC Insured 12/13 at 100.00 AAA 1,740,138
1,865 5.000%, 12/01/24 - AMBAC Insured 12/13 at 100.00 AAA 1,907,541
32
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED (continued)
$ 5,920 California State Public Works Board, Lease Revenue Bonds, 11/09 at 101.00 AAA $ 6,199,303
Department of Veterans Affairs, Southern California Veterans
Home - Chula Vista Facility, Series 1999A, 5.600%, 11/01/19 -
AMBAC Insured (5)
905 California, Economic Recovery Revenue Bonds, 7/14 at 100.00 AA+ 964,440
Series 2004A, 5.000%, 7/01/15
165 Capistrano Unified School District, Orange County, California, 9/15 at 100.00 AAA 170,212
Special Tax Bonds, Community Facilities District, Series 2005,
5.000%, 9/01/24 - FGIC Insured
500 Chino Redevelopment Agency, California, Merged Chino 9/16 at 101.00 AAA 514,070
Redevelopment Project Area Tax Allocation Bonds, Series 2006,
5.000%, 9/01/38 - AMBAC Insured
1,450 Golden State Tobacco Securitization Corporation, California, 6/15 at 100.00 AAA 1,484,452
Enhanced Asset Backed Settlement Revenue Bonds,
Series 2005A, Residual Series 1500, 6.390%, 6/01/45 -
AMBAC Insured (IF)
Irvine, California, Unified School District, Community Facilities
District Special Tax Bonds, Series 2006A:
80 5.000%, 9/01/26 9/16 at 100.00 N/R 76,916
185 5.125%, 9/01/36 9/16 at 100.00 N/R 175,130
2,500 Kern County Board of Education, California, Certificates of 6/16 at 100.00 AAA 2,539,675
Participation, Series 2006A, 5.000%, 6/01/31 - MBIA Insured
3,500 Livermore Redevelopment Agency, California, Tax Allocation 8/11 at 100.00 AAA 3,552,010
Revenue Bonds, Livermore Redevelopment Project Area,
Series 2001A, 5.000%, 8/01/26 - MBIA Insured
310 Los Angeles Community Redevelopment Agency, California, 9/15 at 100.00 Aaa 311,928
Lease Revenue Bonds, Manchester Social Services Project,
Series 2005, 5.000%, 9/01/37 - AMBAC Insured
2,000 Los Angeles, California, Municipal Improvement Corporation, 1/17 at 100.00 AAA 1,962,520
Lease Revenue Bonds, Police Headquarters, Series 2006A,
4.750%, 1/01/31 - FGIC Insured
3,230 Murrieta Redevelopment Agency, California, Tax Allocation 8/15 at 100.00 AAA 3,281,583
Bonds, Series 2005, 5.000%, 8/01/35 - MBIA Insured
1,000 Poway, California, Community Facilities District 88-1, Special 8/08 at 102.00 N/R 1,034,650
Tax Refunding Bonds, Parkway Business Centre, Series 1998,
6.500%, 8/15/09
155 Rialto Redevelopment Agency, California, Tax Allocation Bonds, 9/15 at 100.00 AAA 156,989
Merged Project Area, Series 2005A, 5.000%, 9/01/35 -
XLCA Insured
190 Roseville, California, Certificates of Participation, Public 8/13 at 100.00 AAA 193,152
Facilities, Series 2003A, 5.000%, 8/01/25 - AMBAC Insured
1,500 Sacramento City Financing Authority, California, Lease Revenue No Opt. Call AAA 1,654,935
Refunding Bonds, Series 1993A, 5.400%, 11/01/20 -
MBIA Insured
3,000 Sacramento City Financing Authority, California, Lease Revenue No Opt. Call AA- 3,282,750
Refunding Bonds, Series 1993B, 5.400%, 11/01/20
San Marcos Public Facilities Authority, California, Revenue
Refunding Bonds, Series 1998:
1,500 5.800%, 9/01/18 9/08 at 101.00 Baa3 1,534,980
1,000 5.800%, 9/01/27 9/08 at 101.00 Baa3 1,023,320
2,050 Santa Barbara County, California, Certificates of Participation, 12/11 at 102.00 AAA 2,178,453
Series 2001, 5.250%, 12/01/19 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
35,700 Total Tax Obligation/Limited 36,948,057
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 3.3% (2.1% OF TOTAL INVESTMENTS)
780 Bay Area Toll Authority, California, Revenue Bonds, San Francisco 4/16 at 100.00 AA 802,168
Bay Area Toll Bridge, Series 2006, 5.000%, 4/01/31
2,000 Foothill/Eastern Transportation Corridor Agency, California, Toll 1/10 at 100.00 BBB- 1,889,240
Road Revenue Bonds, Series 1995A, 5.000%, 1/01/35
------------------------------------------------------------------------------------------------------------------------------------
2,780 Total Transportation 2,691,408
------------------------------------------------------------------------------------------------------------------------------------
33
NCU
Nuveen California Premium Income Municipal Fund (continued)
Portfolio of INVESTMENTS August 31, 2007
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 24.5% (15.8% OF TOTAL INVESTMENTS) (4)
California Department of Water Resources, Power Supply Revenue
Bonds, Series 2002A:
$ 400 5.375%, 5/01/17 (Pre-refunded 5/01/12) - XLCA Insured 5/12 at 101.00 AAA $ 433,400
2,250 5.125%, 5/01/18 (Pre-refunded 5/01/12) 5/12 at 101.00 Aaa 2,413,913
1,200 California Health Facilities Financing Authority, Revenue Bonds, 12/09 at 101.00 N/R (4) 1,276,320
Cedars-Sinai Medical Center, Series 1999A, 6.125%, 12/01/30
(Pre-refunded 12/01/09)
3,000 California Infrastructure Economic Development Bank, First Lien No Opt. Call AAA 3,196,080
Revenue Bonds, San Francisco Bay Area Toll Bridge,
Series 2003A, 5.000%, 7/01/22 - FSA Insured (ETM)
Golden State Tobacco Securitization Corporation, California,
Enhanced Tobacco Settlement Asset-Backed Bonds, Series 2003B:
1,000 5.625%, 6/01/33 (Pre-refunded 6/01/13) 6/13 at 100.00 AAA 1,086,250
1,000 5.500%, 6/01/33 (Pre-refunded 6/01/13) 6/13 at 100.00 AAA 1,079,880
2,250 Los Angeles Unified School District, California, General Obligation 7/13 at 100.00 AAA 2,401,493
Bonds, Series 2003A, 5.000%, 7/01/22 (Pre-refunded 7/01/13) -
FSA Insured
3,495 Orange County Sanitation District, California, Certificates of 8/13 at 100.00 AAA 3,779,039
Participation, Series 2003, 5.250%, 2/01/21 (Pre-refunded
8/01/13) - FGIC Insured
2,000 Puerto Rico, General Obligation and Public Improvement Bonds, 7/10 at 100.00 AAA 2,111,700
Series 2000, 5.750%, 7/01/21 (Pre-refunded 7/01/10) -
MBIA Insured
2,000 Vista, California, Mobile Home Park Revenue Bonds, Vista Manor 3/24 at 100.00 N/R (4) 2,094,560
Mobile Home Park Project, Series 1999A, 5.750%, 3/15/29
(Pre-refunded 3/15/24)
------------------------------------------------------------------------------------------------------------------------------------
18,595 Total U.S. Guaranteed 19,872,635
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 6.7% (4.3% OF TOTAL INVESTMENTS)
275 Los Angeles Department of Water and Power, California, Power 7/13 at 100.00 AAA 285,082
System Revenue Bonds, Series 2003A-2, 5.000%, 7/01/21 -
MBIA Insured
295 Merced Irrigation District, California, Electric System Revenue 9/15 at 100.00 AAA 302,192
Bonds, Series 2005, 5.125%, 9/01/31 - XLCA Insured
4,580 Sacramento Municipal Utility District, California, Electric Revenue 8/12 at 100.00 AAA 4,842,342
Refunding Bonds, Series 2002Q, 5.250%, 8/15/20 - FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
5,150 Total Utilities 5,429,616
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 10.9% (7.0% OF TOTAL INVESTMENTS)
1,125 Burbank, California, Wastewater System Revenue Bonds, 6/14 at 100.00 AAA 1,155,701
Series 2004A, 5.000%, 6/01/23 - AMBAC Insured
5,000 Culver City, California, Wastewater Facilities Revenue Refunding 9/09 at 102.00 AAA 5,253,200
Bonds, Series 1999A, 5.700%, 9/01/29 - FGIC Insured
205 Healdsburg Public Financing Authority, California, Wastewater 4/16 at 100.00 AAA 209,367
Revenue Bonds, Series 2006, 5.000%, 4/01/36 - MBIA Insured
370 Sacramento County Sanitation District Financing Authority, 6/16 at 100.00 AAA 380,941
California, Revenue Bonds, Series 2006, 5.000%, 12/01/36 -
FGIC Insured
1,795 Woodbridge Irrigation District, California, Certificates of 7/13 at 100.00 BBB+ 1,820,758
Participation, Water Systems Project, Series 2003,
5.500%, 7/01/33
------------------------------------------------------------------------------------------------------------------------------------
8,495 Total Water and Sewer 8,819,967
------------------------------------------------------------------------------------------------------------------------------------
$ 122,005 Total Investments (cost $122,196,480) - 154.5% 125,417,166
=============-----------------------------------------------------------------------------------------------------------------------
Floating Rate Obligations - (2.9)% (2,352,000)
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.4% 1,134,523
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (53.0)% (43,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 81,199,689
====================================================================================================================
34
FORWARD SWAPS OUTSTANDING AT AUGUST 31, 2007:
FUND FIXED RATE UNREALIZED
NOTIONAL PAY/RECEIVE FLOATING RATE FIXED RATE PAYMENT EFFECTIVE TERMINATION APPRECIATION
COUNTERPARTY AMOUNT FLOATING RATE INDEX (ANNUALIZED) FREQUENCY DATE (6) DATE (DEPRECIATION)
------------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs $1,500,000 Pay 3-Month USD-LIBOR 5.215% Semi-Annually 3/12/08 3/12/30 $(41,719)
JPMorgan 1,500,000 Pay SIFM 4.376 Quarterly 8/06/08 8/06/37 40,701
------------------------------------------------------------------------------------------------------------------------------------
$ (1,018)
====================================================================================================================================
USD-LIBOR (United States Dollar-London Inter-Bank Offered Rate)
SIFM - The daily arithmetic average of the weekly SIFM (the Securities Industry
and Financial Markets) Municipal Swap Index.
The Fund may invest in "zero coupon" securities. A zero
coupon security does not pay a regular interest coupon to
its holders during the life of the security. Tax-exempt
income to the holder of the security comes from accretion of
the difference between the original purchase price of the
security at issuance and the par value of the security at
maturity and is effectively paid at maturity. Such
securities are included in the Portfolio of Investments with
a 0.000% coupon rate in their description. The market prices
of zero coupon securities generally are more volatile than
the market prices of securities that pay interest
periodically.
(1) All percentages shown in the Portfolio of Investments are
based on net assets applicable to Common shares unless
otherwise noted.
(2) Optional Call Provisions (not covered by the report of
independent registered public accounting firm): Dates (month
and year) and prices of the earliest optional call or
redemption. There may be other call provisions at varying
prices at later dates. Certain mortgage-backed securities
may be subject to periodic principal paydowns.
(3) Ratings (not covered by the report of independent registered
public accounting firm): Using the higher of Standard &
Poor's or Moody's rating. Ratings below BBB by Standard &
Poor's Group or Baa by Moody's Investor Service, Inc. are
considered to be below investment grade.
(4) Backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities which ensure
the timely payment of principal and interest. Such
investments are normally considered to be equivalent to AAA
rated securities.
(5) Portion of investment, with an aggregate market value of
$282,738, has been pledged to collateralize the net payment
obligations under forward swap contracts.
(6) Effective date represents the date on which both the Fund
and counterparty commence interest payment accruals on each
forward swap contract.
N/R Not rated.
(ETM) Escrowed to maturity.
(IF) Inverse floating rate investment.
(UB) Underlying bond of an inverse floating rate trust reflected
as a financing transaction pursuant to the provisions of
SFAS No. 140.
See accompanying notes to financial statements.
35
NAC
Nuveen California Dividend Advantage Municipal Fund
Portfolio of INVESTMENTS
August 31, 2007
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 4.9% (3.2% OF TOTAL INVESTMENTS)
$ 1,250 California County Tobacco Securitization Agency, Tobacco 6/15 at 100.00 BBB $ 1,158,913
Settlement Asset-Backed Bonds, Sonoma County Tobacco
Securitization Corporation, Series 2005, 4.250%, 6/01/21
24,265 Golden State Tobacco Securitization Corporation, California, 6/22 at 100.00 BBB 15,964,429
Enhanced Tobacco Settlement Asset-Backed Bonds,
Series 2007A-2, 0.000%, 6/01/37
------------------------------------------------------------------------------------------------------------------------------------
25,515 Total Consumer Staples 17,123,342
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 5.2% (3.5% OF TOTAL INVESTMENTS)
290 California Educational Facilities Authority, Revenue Bonds, 10/15 at 100.00 A3 284,832
University of Redlands, Series 2005A, 5.000%, 10/01/35
10,000 California Educational Facilities Authority, Revenue Bonds, 10/17 at 100.00 AA+ 9,351,400
University of Southern California, Series 2007A, 4.500%, 10/01/33
California Educational Facilities Authority, Revenue Bonds,
University of the Pacific, Series 2006:
200 5.000%, 11/01/21 11/15 at 100.00 A2 205,864
265 5.000%, 11/01/25 11/15 at 100.00 A2 269,513
615 California Statewide Community Development Authority, 10/13 at 100.00 N/R 654,391
Revenue Bonds, Notre Dame de Namur University,
Series 2003, 6.500%, 10/01/23
760 California Statewide Community Development Authority, 10/15 at 100.00 BBB- 685,087
Revenue Bonds, Thomas Jefferson School of Law,
Series 2005A, 4.875%, 10/01/31
3,000 Long Beach Bond Financing Authority, California, Lease Revenue 11/11 at 100.00 AAA 3,208,020
Refunding Bonds, Long Beach Aquarium of the South Pacific,
Series 2001, 5.500%, 11/01/17 - AMBAC Insured
3,500 University of California, Revenue Bonds, Multi-Purpose Projects, 5/13 at 100.00 AAA 3,733,100
Series 2003A, 5.125%, 5/15/17 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
18,630 Total Education and Civic Organizations 18,392,207
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 15.9% (10.5% OF TOTAL INVESTMENTS)
2,160 California Health Facilities Financing Authority, Health Facility 3/13 at 100.00 A 2,220,782
Revenue Bonds, Adventist Health System/West, Series 2003A,
5.000%, 3/01/15
10,140 California Health Facilities Financing Authority, Revenue Bonds, 3/16 at 100.00 A+ 10,157,238
Kaiser Permanante System, Series 2006, 5.250%, 3/01/45
14,895 California Health Facilities Financing Authority, Revenue Bonds, 11/16 at 100.00 AA- 15,161,471
Sutter Health, Series 2007A, 5.250%, 11/15/46 (UB)
1,535 California Statewide Communities Development Authority, 7/17 at 100.00 N/R 1,395,438
Revenue Bonds, ValleyCare Health System, Series 2007A,
5.125%, 7/15/31
9,940 California Statewide Community Development Authority, 3/16 at 100.00 A+ 9,603,233
Revenue Bonds, Kaiser Permanante System, Series 2006,
5.000%, 3/01/41
3,095 California Statewide Community Development Authority, 8/16 at 100.00 A+ 3,124,464
Revenue Bonds, Kaiser Permanente System, Series 2001C,
5.250%, 8/01/31
36
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE (continued)
$ 10,500 Duarte, California, Certificates of Participation, City of Hope 4/09 at 101.00 A- $ 10,526,670
National Medical Center, Series 1999A, 5.250%, 4/01/31
3,690 Rancho Mirage Joint Powers Financing Authority, California, 7/17 at 100.00 A3 3,588,008
Revenue Bonds, Eisenhower Medical Center, Series 2007A,
5.000%, 7/01/38
------------------------------------------------------------------------------------------------------------------------------------
55,955 Total Health Care 55,777,304
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 6.2% (4.1% OF TOTAL INVESTMENTS)
5,120 California Statewide Community Development Authority, 8/12 at 105.00 Aaa 5,567,949
GNMA Collateralized Housing Revenue Refunding Bonds,
Crowne Pointe Project, Series 2002F, 6.750%, 8/20/37
5,000 Contra Costa County, California, Multifamily Housing Revenue 6/09 at 102.00 N/R 5,151,500
Bonds, Delta View Apartments Project, Series 1999C,
6.750%, 12/01/30 (Alternative Minimum Tax)
320 Independent Cities Lease Finance Authority, California, Mobile 5/16 at 100.00 N/R 299,469
Home Park Revenue Bonds, San Juan Mobile Estates,
Series 2006B, 5.850%, 5/15/41
1,725 Rohnert Park Finance Authority, California, Senior Lien 9/13 at 100.00 A+ 1,745,528
Revenue Bonds, Rancho Feliz Mobile Home Park,
Series 2003A, 5.750%, 9/15/38
1,120 Rohnert Park Finance Authority, California, Subordinate Lien 9/13 at 100.00 N/R 1,155,269
Revenue Bonds, Rancho Feliz Mobile Home Park,
Series 2003B, 6.625%, 9/15/38
7,500 San Bernardino County Housing Authority, California, Multifamily No Opt. Call A- 7,647,675
Housing Revenue Refunding Bonds, Equity Residential
Properties/Redlands Lawn and Tennis Apartments,
Series 1999A, 5.200%, 6/15/29 (Mandatory put 6/15/09)
------------------------------------------------------------------------------------------------------------------------------------
20,785 Total Housing/Multifamily 21,567,390
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 0.3% (0.2% OF TOTAL INVESTMENTS)
840 California Housing Finance Agency, Home Mortgage Revenue 2/16 at 100.00 AAA 878,699
Bonds, Series 2006H, 5.750%, 8/01/30 - FGIC Insured
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 1.9% (1.2% OF TOTAL INVESTMENTS)
2,000 California Pollution Control Financing Authority, Solid Waste 1/16 at 102.00 BBB 1,912,080
Disposal Revenue Bonds, Waste Management Inc.,
Series 2002A, 5.000%, 1/01/22 (Alternative Minimum Tax)
5,120 California Statewide Communities Development Authority, No Opt. Call BB 4,640,000
Revenue Bonds, EnerTech Regional Biosolids Project,
Series 2007A, 5.500%, 12/01/33 (DD, Settling 9/06/07)
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
7,120 Total Industrials 6,552,080
------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CARE - 2.4% (1.6% OF TOTAL INVESTMENTS)
8,500 Riverside County Public Financing Authority, California, 5/09 at 101.00 BBB- 8,552,785
Certificates of Participation, Air Force Village West,
Series 1999, 5.800%, 5/15/29
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 13.0% (8.6% OF TOTAL INVESTMENTS)
2,000 California, General Obligation Bonds, Series 2003, 11/13 at 100.00 AA 2,112,600
5.250%, 11/01/19 - RAAI Insured
California, General Obligation Bonds, Series 2004:
5,000 5.125%, 4/01/23 4/14 at 100.00 A+ 5,168,950
4,150 5.125%, 4/01/25 4/14 at 100.00 A+ 4,278,318
4,435 California, General Obligation Refunding Bonds, Series 2002, No Opt. Call AAA 5,081,845
6.000%, 4/01/16 - AMBAC Insured
5,000 Coast Community College District, Orange County, California, 8/16 at 100.00 AAA 5,202,250
General Obligation Bonds, Series 2006B, 5.000%, 8/01/24 -
FSA Insured
5,000 Fresno Unified School District, Fresno County, California, No Opt. Call AAA 5,798,800
General Obligation Bonds, Series 2002A, 6.000%, 8/01/26 -
MBIA Insured
5,210 Oak Valley Hospital District, Stanislaus County, California, 7/14 at 101.00 Aaa 5,282,106
General Obligation Bonds, Series 2005, 5.000%, 7/01/35 -
FGIC Insured
37
NAC
Nuveen California Dividend Advantage Municipal Fund (continued)
Portfolio of INVESTMENTS August 31, 2007
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL (continued)
$ 575 Roseville Joint Union High School District, Placer County, 8/15 at 100.00 AAA $ 592,980
California, General Obligation Bonds, Series 2006B,
5.000%, 8/01/27 - FGIC Insured
5,000 San Diego Unified School District, San Diego County, California, 7/13 at 101.00 AAA 5,403,750
General Obligation Bonds, Series 2003E, 5.250%, 7/01/20 -
FSA Insured
2,865 San Ramon Valley Unified School District, Contra Costa County, 8/16 at 100.00 AAA 3,004,554
California, General Obligation Bonds, Series 2006,
5.000%, 8/01/21 - MBIA Insured
3,605 West Contra Costa Unified School District, Contra Costa County, 8/11 at 101.00 AAA 3,737,123
California, General Obligation Bonds, Series 2003B,
5.000%, 8/01/21 - FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
42,840 Total Tax Obligation/General 45,663,276
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 25.5% (16.9% OF TOTAL INVESTMENTS)
Beaumont Financing Authority, California, Local Agency Revenue
Bonds, Series 2004D:
1,000 5.500%, 9/01/24 9/14 at 102.00 N/R 1,015,240
615 5.800%, 9/01/35 9/14 at 102.00 N/R 627,306
1,990 Borrego Water District, California, Community Facilities 8/17 at 102.00 N/R 1,928,290
District 2007-1 Montesoro, Special Tax Bonds, Series 2007,
5.750%, 8/01/25
1,990 Brentwood Infrastructure Financing Authority, California, 9/12 at 100.00 AAA 2,045,163
Infrastructure Revenue Refunding Bonds, Series 2002A,
5.125%, 9/02/24 - FSA Insured
Brentwood Infrastructure Financing Authority, Contra Costa
County, California, Capital Improvement Revenue Bonds,
Series 2001:
1,110 5.375%, 11/01/18 - FSA Insured 11/11 at 100.00 AAA 1,173,869
1,165 5.375%, 11/01/19 - FSA Insured 11/11 at 100.00 AAA 1,232,034
3,895 California, Economic Recovery Revenue Bonds, Series 2004A, 7/14 at 100.00 AA+ 4,150,824
5.000%, 7/01/15
2,000 Capistrano Unified School District, Orange County, California, 9/13 at 100.00 N/R 2,056,180
Special Tax Bonds, Community Facilities District 90-2 - Talega,
Series 2003, 6.000%, 9/01/33
710 Capistrano Unified School District, Orange County, California, 9/15 at 100.00 AAA 732,429
Special Tax Bonds, Community Facilities District, Series 2005,
5.000%, 9/01/24 - FGIC Insured
1,225 Chino Redevelopment Agency, California, Merged Chino 9/16 at 101.00 AAA 1,259,472
Redevelopment Project Area Tax Allocation Bonds,
Series 2006, 5.000%, 9/01/38 - AMBAC Insured
3,490 Fontana, California, Senior Special Tax Refunding Bonds, 9/08 at 102.00 AAA 3,612,010
Heritage Village Community Facilities District 2, Series 1998A,
5.250%, 9/01/17 - MBIA Insured
1,125 Fontana, California, Special Tax Bonds, Sierra Community 9/14 at 100.00 N/R 1,156,995
Facilities District 22, Series 2004, 6.000%, 9/01/34
3,980 Garden Grove, California, Certificates of Participation, Financing 3/12 at 101.00 AAA 4,236,630
Project, Series 2002A, 5.500%, 3/01/22 - AMBAC Insured
2,850 Hesperia Community Redevelopment Agency, California, Tax 9/15 at 100.00 AAA 2,886,566
Allocation Bonds, Series 2005A, 5.000%, 9/01/35 -
XLCA Insured
4,500 Inglewood Redevelopment Agency, California, Tax Allocation No Opt. Call AAA 4,909,680
Refunding Bonds, Merged Area Redevelopment Project,
Series 1998A, 5.250%, 5/01/23 - AMBAC Insured
Irvine, California, Unified School District, Community Facilities
District Special Tax Bonds, Series 2006A:
345 5.000%, 9/01/26 9/16 at 100.00 N/R 331,700
795 5.125%, 9/01/36 9/16 at 100.00 N/R 752,587
675 Lammersville School District, San Joaquin County, California, 9/16 at 100.00 N/R 635,843
Community Facilities District 2002, Mountain House Special
Tax Bonds, Series 2006, 5.125%, 9/01/35
2,000 Lee Lake Water District, Riverside County, California, Special 9/13 at 102.00 N/R 2,154,960
Tax Bonds, Community Facilities District 1 of Sycamore Creek,
Series 2003, 6.500%, 9/01/24
1,000 Lindsay Redevelopment Agency, California, Project 1 Tax 8/17 at 100.00 AA 907,300
Allocation Bonds, Series 2007, 5.000%, 8/01/37 -
RAAI Insured
38
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED (continued)
$ 1,290 Los Angeles Community Redevelopment Agency, California, 9/15 at 100.00 Aaa $ 1,298,024
Lease Revenue Bonds, Manchester Social Services Project,
Series 2005, 5.000%, 9/01/37 - AMBAC Insured
5,000 Los Angeles County Metropolitan Transportation Authority, 7/08 at 101.00 AAA 5,072,600
California, Proposition C Second Senior Lien Sales Tax
Revenue Refunding Bonds, Series 1998A, 5.000%, 7/01/23 -
AMBAC Insured
1,530 Moreno Valley Unified School District, Riverside County, 3/14 at 100.00 AAA 1,561,028
California, Certificates of Participation, Series 2005,
5.000%, 3/01/24 - FSA Insured
3,500 Murrieta Redevelopment Agency, California, Tax Allocation 8/17 at 100.00 AAA 3,567,025
Bonds, Series 2007A, 5.000%, 8/01/37 - MBIA Insured
9,200 Norco Redevelopment Agency, California, Tax Allocation Refunding 3/11 at 102.00 AAA 9,570,484
Bonds, Project Area 1, Series 2001, 5.000%, 3/01/19 -
MBIA Insured
North Natomas Community Facilities District 4, Sacramento,
California, Special Tax Bonds, Series 2006D:
550 5.000%, 9/01/26 9/14 at 102.00 N/R 525,635
250 5.000%, 9/01/33 9/14 at 102.00 N/R 233,965
3,290 Oakland Redevelopment Agency, California, Subordinate Lien 3/13 at 100.00 AAA 3,564,912
Tax Allocation Bonds, Central District Redevelopment Project,
Series 2003, 5.500%, 9/01/16 - FGIC Insured
5,600 Palm Springs Financing Authority, California, Lease Revenue 11/11 at 101.00 AAA 5,764,416
Refunding Bonds, Convention Center Project, Series 2001A,
5.000%, 11/01/22 - MBIA Insured
1,000 Palmdale Community Redevelopment Agency, California, 12/14 at 100.00 AAA 1,025,900
Tax Allocation Bonds, Merged Redevelopment Project Areas,
Series 2004, 5.000%, 12/01/24 - AMBAC Insured
1,570 Poway Redevelopment Agency, California, Tax Allocation 12/10 at 102.00 AAA 1,679,837
Refunding Bonds, Paguay Redevelopment Project, Series 2000,
5.750%, 6/15/33 - MBIA Insured
620 Rialto Redevelopment Agency, California, Tax Allocation Bonds, 9/15 at 100.00 AAA 627,955
Merged Project Area, Series 2005A, 5.000%, 9/01/35 -
XLCA Insured
1,860 Riverside Redevelopment Agency, California, Tax Allocation 8/13 at 100.00 AAA 1,948,908
Refunding Bonds, Merged Project Areas, Series 2003,
5.250%, 8/01/22 - MBIA Insured
770 Roseville, California, Certificates of Participation, Public 8/13 at 100.00 AAA 782,774
Facilities, Series 2003A, 5.000%, 8/01/25 - AMBAC Insured
2,500 Sacramento City Financing Authority, California, Lease Revenue No Opt. Call AAA 2,758,225
Refunding Bonds, Series 1993A, 5.400%, 11/01/20 -
AMBAC Insured
1,150 Sacramento, California, Special Tax Bonds, North Natomas 9/14 at 100.00 N/R 1,186,743
Community Facilities District 4, Series 2003C, 6.000%, 9/01/33
2,695 San Jose Financing Authority, California, Lease Revenue 6/12 at 100.00 AAA 2,841,042
Refunding Bonds, Civic Center Project, Series 2002B,
5.250%, 6/01/19 - AMBAC Insured
1,000 Washington Unified School District, Yolo County, California, 8/17 at 100.00 AAA 1,023,380
Certificates of Participation, Series 2007, 5.125%, 8/01/37 -
AMBAC Insured
2,810 West Patterson Financing Authority, California, Special Tax 9/13 at 103.00 N/R 3,105,949
Bonds, Community Facilities District 01-1, Series 2003B,
7.000%, 9/01/38
2,000 West Patterson Financing Authority, California, Special Tax Bonds, 9/13 at 102.00 N/R 2,059,460
Community Facilities District 01-1, Series 2004B,
6.000%, 9/01/39
1,350 West Patterson Financing Authority, California, Special Tax 9/13 at 103.00 N/R 1,407,321
Bonds, Community Facilities District 2001-1, Series 2004A,
6.125%, 9/01/39
------------------------------------------------------------------------------------------------------------------------------------
85,995 Total Tax Obligation/Limited 89,410,661
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 19.1% (12.7% OF TOTAL INVESTMENTS)
1,430 Bay Area Toll Authority, California, Revenue Bonds, 4/16 at 100.00 AA 1,470,641
San Francisco Bay Area Toll Bridge, Series 2006,
5.000%, 4/01/31
8,150 Foothill/Eastern Transportation Corridor Agency, California, 1/10 at 101.00 BBB- 8,241,199
Toll Road Revenue Refunding Bonds, Series 1999,
5.750%, 1/15/40
39
NAC
Nuveen California Dividend Advantage Municipal Fund (continued)
Portfolio of INVESTMENTS August 31, 2007
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION (continued)
$ 8,515 Los Angeles Harbors Department, California, Revenue Refunding 8/11 at 100.00 AAA $ 8,880,975
Bonds, Series 2001B, 5.500%, 8/01/18 - AMBAC Insured
(Alternative Minimum Tax)
120 Palm Springs Financing Authority, California, Palm Springs 7/14 at 102.00 N/R 117,659
International Airport Revenue Bonds, Series 2006,
5.450%, 7/01/20 (Alternative Minimum Tax)
23,000 Port of Oakland, California, Revenue Bonds, Series 2000K, 5/10 at 100.00 AAA 23,897,920
5.750%, 11/01/29 - FGIC Insured (Alternative Minimum Tax)
23,275 San Francisco Airports Commission, California, Revenue Bonds, 5/10 at 101.00 AAA 24,404,070
San Francisco International Airport, Second Series 2000,
Issue 24A, 5.750%, 5/01/30 - FSA Insured (Alternative
Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
64,490 Total Transportation 67,012,464
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 40.4% (26.7% OF TOTAL INVESTMENTS) (4)
9,750 California Department of Water Resources, Power Supply 5/12 at 101.00 Aaa 10,460,288
Revenue Bonds, Series 2002A, 5.125%, 5/01/18
(Pre-refunded 5/01/12)
15,000 California Health Facilities Financing Authority, Revenue Bonds, 12/09 at 101.00 N/R (4) 15,954,000
Cedars-Sinai Medical Center, Series 1999A, 6.125%, 12/01/30
(Pre-refunded 12/01/09)
8,400 California Health Facilities Financing Authority, Revenue Bonds, 10/08 at 101.00 AAA 8,624,700
Kaiser Permanente System, Series 1998B,
5.250%, 10/01/14 (ETM)
8,000 Central California Joint Powers Health Finance Authority, 2/10 at 101.00 AAA 8,517,120
Certificates of Participation, Community Hospitals of Central
California Obligated Group, Series 2000, 6.000%, 2/01/30
(Pre-refunded 2/01/10)
5,200 Golden State Tobacco Securitization Corporation, California, 6/13 at 100.00 AAA 5,698,004
Tobacco Settlement Asset-Backed Bonds, Series 2003A-1,
6.250%, 6/01/33 (Pre-refunded 6/01/13)
1,940 Lincoln, California, Special Tax Bonds, Lincoln Crossing 9/13 at 102.00 N/R (4) 2,244,076
Community Facilities District 03-1, Series 2003A,
6.500%, 9/01/25 (Pre-refunded 9/01/13)
1,335 Lincoln, California, Special Tax Bonds, Lincoln Crossing 9/13 at 102.00 N/R (4) 1,508,790
Community Facilities District 03-1, Series 2004,
6.000%, 9/01/34 (Pre-refunded 9/01/13)
10,500 Los Angeles Unified School District, California, General 7/09 at 101.00 AAA 10,912,965
Obligation Bonds, Series 1999C, 5.250%, 7/01/24
(Pre-refunded 7/01/09) - MBIA Insured
10,845 Los Angeles Unified School District, California, General 7/12 at 100.00 AAA 11,524,873
Obligation Bonds, Series 2002E, 5.000%, 7/01/19
(Pre-refunded 7/01/12) - MBIA Insured
3,335 Moreno Valley Unified School District, Riverside County, 8/14 at 100.00 AAA 3,633,583
California, General Obligation Bonds, Series 2004A,
5.250%, 8/01/21 (Pre-refunded 8/01/14) - FSA Insured
Northern California Tobacco Securitization Authority, Tobacco
Settlement Asset-Backed Bonds, Series 2001A:
2,500 5.250%, 6/01/31 (Pre-refunded 6/01/11) 6/11 at 100.00 AAA 2,643,175
4,500 5.375%, 6/01/41 (Pre-refunded 6/01/11) 6/11 at 100.00 AAA 4,777,290
1,750 Oakland Unified School District, Alameda County, California, 8/08 at 101.00 AAA 1,791,825
General Obligation Bonds, Series 2001, 5.125%, 8/01/21
(Pre-refunded 8/01/08) - FSA Insured
5,840 Orange County Water District, California, Revenue Certificates 8/09 at 101.00 AA+ (4) 6,064,782
of Participation, Series 1999A, 5.375%, 8/15/29 (ETM)
4,000 Orange County Water District, California, Revenue Certificates 8/09 at 101.00 AA+ (4) 4,174,400
of Participation, Series 1999A, 5.375%, 8/15/29
(Pre-refunded 8/15/09)
6,530 Poway Redevelopment Agency, California, Tax Allocation 12/10 at 102.00 Aaa 7,087,140
Refunding Bonds, Paguay Redevelopment Project, Series 2000,
5.750%, 6/15/33 (Pre-refunded 12/15/10) - MBIA Insured
4,000 Puerto Rico, General Obligation and Public Improvement Bonds, 7/10 at 100.00 AAA 4,223,400
Series 2000, 5.750%, 7/01/16 (Pre-refunded 7/01/10) -
MBIA Insured
1,590 San Marcos Public Facilities Authority, California, Special Tax 9/09 at 102.00 N/R (4) 1,689,900
Bonds, Community Facilities District 99-1, Series 2003B,
6.000%, 9/01/24 (Pre-refunded 9/01/09)
2,860 Tobacco Securitization Authority of Southern California, 6/12 at 100.00 AAA 3,062,517
Tobacco Settlement Asset-Backed Bonds, San Diego County
Tobacco Asset Securitization Corporation, Senior Series 2001A,
5.250%, 6/01/27 (Pre-refunded 6/01/12)
40
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED (4) (continued)
$ 700 University of California, Certificates of Participation, San Diego 1/10 at 101.00 Aa2 (4) $ 732,753
and Sacramento Campus Projects, Series 2002A,
5.250%, 1/01/22 (Pre-refunded 1/01/10)
University of California, Revenue Bonds, Multi-Purpose Projects,
Series 2002O:
10,770 5.000%, 9/01/20 (Pre-refunded 9/01/10) - FGIC Insured 9/10 at 101.00 AAA 11,306,992
11,305 5.000%, 9/01/21 (Pre-refunded 9/01/10) - FGIC Insured 9/10 at 101.00 AAA 11,868,667
2,500 Whittier, California, Health Facility Revenue Bonds, Presbyterian 6/12 at 101.00 A+ (4) 2,735,975
Intercommunity Hospital, Series 2002, 5.600%, 6/01/22
(Pre-refunded 6/01/12)
------------------------------------------------------------------------------------------------------------------------------------
133,150 Total U.S. Guaranteed 141,237,215
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 7.6% (5.1% OF TOTAL INVESTMENTS)
3,630 Imperial Irrigation District, California, Certificates of 11/13 at 100.00 AAA 3,766,052
Participation, Electric System Revenue Bonds, Series 2003,
5.250%, 11/01/23 - FSA Insured
7,000 Los Angeles Department of Water and Power, California, Power 7/11 at 100.00 AAA 7,277,410
System Revenue Bonds, Series 2001A-1, 5.250%, 7/01/21 -
FSA Insured
8,370 Los Angeles Department of Water and Power, California, Power 7/11 at 100.00 AAA 8,803,650
System Revenue Bonds, Series 2001A-2, 5.375%, 7/01/19 -
MBIA Insured
5,500 Los Angeles Department of Water and Power, California, Power 7/15 at 100.00 AAA 5,644,815
System Revenue Bonds, Series 2005A-1, 5.000%, 7/01/31 -
FSA Insured
1,270 Merced Irrigation District, California, Electric System Revenue 9/15 at 100.00 AAA 1,300,963
Bonds, Series 2005, 5.125%, 9/01/31 - XLCA Insured
------------------------------------------------------------------------------------------------------------------------------------
25,770 Total Utilities 26,792,890
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 8.6% (5.7% OF TOTAL INVESTMENTS)
9,165 California Department of Water Resources, Water System 12/11 at 100.00 AAA 9,586,220
Revenue Bonds, Central Valley Project, Series 2001W,
5.250%, 12/01/22 - FSA Insured
875 Healdsburg Public Financing Authority, California, Wastewater 4/16 at 100.00 AAA 893,638
Revenue Bonds, Series 2006, 5.000%, 4/01/36 - MBIA Insured
2,500 Indio Water Authority, California, Water Revenue Bonds, 4/16 at 100.00 AAA 2,576,425
Series 2006, 5.000%, 4/01/31 - AMBAC Insured
835 Marina Coast Water District, California, Enterprise Certificate of 6/16 at 100.00 AAA 848,251
Participation, Series 2006, 5.000%, 6/01/31 - MBIA Insured
8,250 Pico Rivera Water Authority, California, Revenue Bonds, 12/11 at 102.00 N/R 8,592,540
Series 2001A, 6.250%, 12/01/32
2,250 Sacramento County Sanitation District Financing Authority, 6/16 at 100.00 AAA 2,323,080
California, Revenue Bonds, Series 2006, 5.000%, 12/01/31 -
FGIC Insured
5,115 San Francisco City and County Public Utilities Commission, 11/12 at 100.00 AAA 5,347,681
California, Water Revenue Bonds, Series 2002A,
5.000%, 11/01/18 - MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
28,990 Total Water and Sewer 30,167,835
------------------------------------------------------------------------------------------------------------------------------------
$ 518,580 Total Investments (cost $514,017,691) - 151.0% 529,128,148
=============-----------------------------------------------------------------------------------------------------------------------
Floating Rate Obligations - (2.8)% (9,928,000)
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.7% 6,323,271
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (49.9)% (175,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 350,523,419
====================================================================================================================
41
NAC
Nuveen California Dividend Advantage Municipal Fund (continued)
Portfolio of INVESTMENTS August 31, 2007
FORWARD SWAPS OUTSTANDING AT AUGUST 31, 2007:
FUND FIXED RATE UNREALIZED
NOTIONAL PAY/RECEIVE FLOATING RATE FIXED RATE PAYMENT EFFECTIVE TERMINATION APPRECIATION
COUNTERPARTY AMOUNT FLOATING RATE INDEX (ANNUALIZED) FREQUENCY DATE (5) DATE (DEPRECIATION)
------------------------------------------------------------------------------------------------------------------------------------
Goldman
Sachs $24,000,000 Pay 3-Month USD-LIBOR 5.953% Semi-Annually 7/01/08 7/01/33 $1,556,628
JPMorgan 26,500,000 Pay SIFM 4.376 Quarterly 8/06/08 8/06/37 719,048
------------------------------------------------------------------------------------------------------------------------------------
$2,275,676
====================================================================================================================================
USD-LIBOR (United States Dollar-London Inter-Bank Offered Rate)
SIFM - The daily arithmetic average of the weekly SIFM (the Securities Industry
and Financial Markets) Municipal Swap Index.
The Fund may invest in "zero coupon" securities. A zero
coupon security does not pay a regular interest coupon to
its holders during the life of the security. Tax-exempt
income to the holder of the security comes from accretion of
the difference between the original purchase price of the
security at issuance and the par value of the security at
maturity and is effectively paid at maturity. Such
securities are included in the Portfolio of Investments with
a 0.000% coupon rate in their description. The market prices
of zero coupon securities generally are more volatile than
the market prices of securities that pay interest
periodically.
(1) All percentages shown in the Portfolio of Investments are
based on net assets applicable to Common shares unless
otherwise noted.
(2) Optional Call Provisions (not covered by the report of
independent registered public accounting firm): Dates (month
and year) and prices of the earliest optional call or
redemption. There may be other call provisions at varying
prices at later dates. Certain mortgage-backed securities
may be subject to periodic principal paydowns.
(3) Ratings (not covered by the report of independent registered
public accounting firm): Using the higher of Standard &
Poor's or Moody's rating. Ratings below BBB by Standard &
Poor's Group or Baa by Moody's Investor Service, Inc. are
considered to be below investment grade.
(4) Backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities which ensure
the timely payment of principal and interest. Such
investments are normally considered to be equivalent to AAA
rated securities.
(5) Effective date represents the date on which both the Fund
and counterparty commence interest payment accruals on each
forward swap contract.
N/R Not rated.
DD Portion of investment purchased on a delayed delivery basis.
(ETM) Escrowed to maturity.
(UB) Underlying bond of an inverse floating rate trust reflected
as a financing transaction pursuant to the provisions of
SFAS No. 140.
See accompanying notes to financial statements.
42
NVX
Nuveen California Dividend Advantage Municipal Fund 2
Portfolio of INVESTMENTS
August 31, 2007
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 6.5% (4.3% OF TOTAL INVESTMENTS)
$ 775 California County Tobacco Securitization Agency, Tobacco 6/15 at 100.00 BBB $ 718,526
Settlement Asset-Backed Bonds, Sonoma County Tobacco
Securitization Corporation, Series 2005, 4.250%, 6/01/21
4,625 California County Tobacco Securitization Agency, Tobacco 6/12 at 100.00 Baa3 4,596,233
Settlement Asset-Backed Bonds, Stanislaus County Tobacco
Funding Corporation, Series 2002A, 5.500%, 6/01/33
13,480 Golden State Tobacco Securitization Corporation, California, 6/22 at 100.00 BBB 8,868,762
Enhanced Tobacco Settlement Asset-Backed Bonds,
Series 2007A-2, 0.000%, 6/01/37
------------------------------------------------------------------------------------------------------------------------------------
18,880 Total Consumer Staples 14,183,521
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 12.5% (8.2% OF TOTAL INVESTMENTS)
2,000 California Educational Facilities Authority, Revenue Bonds, 6/11 at 101.00 AAA 2,066,480
Stanford University, Series 2001Q, 5.250%, 12/01/32
180 California Educational Facilities Authority, Revenue Bonds, 10/15 at 100.00 A3 176,792
University of Redlands, Series 2005A, 5.000%, 10/01/35
California Educational Facilities Authority, Revenue Bonds,
University of the Pacific, Series 2006:
125 5.000%, 11/01/21 11/15 at 100.00 A2 128,665
165 5.000%, 11/01/25 11/15 at 100.00 A2 167,810
6,375 California Educational Facilities Authority, Student Loan Revenue 3/08 at 102.00 Aaa 6,510,469
Bonds, Cal Loan Program, Series 2001A, 5.400%, 3/01/21 -
MBIA Insured (Alternative Minimum Tax)
10,570 California State Public Works Board, Lease Revenue Bonds, 10/12 at 100.00 AAA 11,219,737
University of California, UCLA Replacement Hospital Project,
Series 2002A, 5.375%, 10/01/18 - FSA Insured
620 California Statewide Community Development Authority, Revenue 10/13 at 100.00 N/R 659,711
Bonds, Notre Dame de Namur University, Series 2003,
6.500%, 10/01/23
475 California Statewide Community Development Authority, Revenue 10/15 at 100.00 BBB- 428,179
Bonds, Thomas Jefferson School of Law, Series 2005A,
4.875%, 10/01/31
3,000 Long Beach Bond Financing Authority, California, Lease Revenue 11/11 at 101.00 AAA 3,092,040
Refunding Bonds, Long Beach Aquarium of the South Pacific,
Series 2001, 5.250%, 11/01/30 - AMBAC Insured
3,000 University of California System, General Revenue Bonds, 5/15 at 101.00 AAA 2,816,790
Series 2006J, 4.500%, 5/15/35 - FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
26,510 Total Education and Civic Organizations 27,266,673
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 20.5% (13.4% OF TOTAL INVESTMENTS)
2,000 California Health Facilities Financing Authority, Revenue Bonds, 4/12 at 100.00 BBB+ 2,066,460
Casa Colina Inc., Series 2001, 6.000%, 4/01/22
2,465 California Health Facilities Financing Authority, Revenue Bonds, 11/15 at 100.00 A2 2,452,108
Cedars-Sinai Medical Center, Series 2005, 5.000%, 11/15/34
9,260 California Health Facilities Financing Authority, Revenue Bonds, 11/16 at 100.00 AA- 9,425,661
Sutter Health, Series 2007A, 5.250%, 11/15/46 (UB)
500 California Infrastructure Economic Development Bank, 8/11 at 102.00 A+ 511,675
Revenue Bonds, Kaiser Hospital Assistance LLC, Series 2001A,
5.550%, 8/01/31
43
NVX
Nuveen California Dividend Advantage Municipal Fund 2 (continued)
Portfolio of INVESTMENTS August 31, 2007
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE (continued)
$ 955 California State Public Works Board, Revenue Bonds, University 11/14 at 100.00 AAA $ 988,349
of California - Davis Medical Center, Series 2004II-A,
5.000%, 11/01/22 - MBIA Insured
960 California Statewide Communities Development Authority, 7/17 at 100.00 N/R 872,717
Revenue Bonds, ValleyCare Health System, Series 2007A,
5.125%, 7/15/31
2,185 California Statewide Community Development Authority, No Opt. Call A+ 2,341,665
Health Facility Revenue Refunding Bonds, Memorial Health
Services, Series 2003A, 6.000%, 10/01/11
2,500 California Statewide Community Development Authority, 6/13 at 100.00 AAA 2,630,225
Hospital Revenue Bonds, Monterey Peninsula Hospital,
Series 2003B, 5.250%, 6/01/18 - FSA Insured
6,190 California Statewide Community Development Authority, 3/16 at 100.00 A+ 5,980,283
Revenue Bonds, Kaiser Permanante System, Series 2006,
5.000%, 3/01/41
1,925 California Statewide Community Development Authority, 8/16 at 100.00 A+ 1,943,326
Revenue Bonds, Kaiser Permanente System, Series 2001C,
5.250%, 8/01/31
5,355 California Statewide Community Development Authority, No Opt. Call A+ 5,433,451
Revenue Bonds, Kaiser Permanente System, Series 2002E,
4.700%, 11/01/36 (Mandatory put 6/01/09)
2,000 California Statewide Community Development Authority, 4/17 at 100.00 A+ 1,850,760
Revenue Bonds, Kaiser Permanente System, Series 2007A,
4.750%, 4/01/33
8,305 Rancho Mirage Joint Powers Financing Authority, California, 7/17 at 100.00 A3 8,075,450
Revenue Bonds, Eisenhower Medical Center, Series 2007A,
5.000%, 7/01/38
------------------------------------------------------------------------------------------------------------------------------------
44,600 Total Health Care 44,572,130
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 10.0% (6.6% OF TOTAL INVESTMENTS)
2,450 ABAG Finance Authority for Non-Profit Corporations, California, No Opt. Call BBB 2,495,521
Multifamily Housing Revenue Refunding Bonds, United
Dominion/2000 Post Apartments, Series 2000B,
6.250%, 8/15/30 (Mandatory put 8/15/08)
3,415 California Statewide Community Development Authority, 8/12 at 105.00 Aaa 3,713,778
GNMA Collateralized Housing Revenue Refunding Bonds,
Crowne Pointe Project, Series 2002F, 6.750%, 8/20/37
5,962 California Statewide Community Development Authority, 6/11 at 102.00 AAA 6,219,857
Multifamily Housing Revenue Refunding Bonds, Claremont
Village Apartments, Series 2001D, 5.500%, 6/01/31
(Mandatory put 6/01/16) (Alternative Minimum Tax)
4,000 Daly City Housing Development Finance Agency, California, 12/13 at 102.00 A- 4,071,840
Mobile Home Park Revenue Bonds, Franciscan Mobile
Home Park Project, Series 2002A, 5.850%, 12/15/32
205 Independent Cities Lease Finance Authority, California, 5/16 at 100.00 N/R 191,847
Mobile Home Park Revenue Bonds, San Juan Mobile
Estates, Series 2006B, 5.850%, 5/15/41
1,055 Rohnert Park Finance Authority, California, Senior Lien 9/13 at 100.00 A+ 1,067,555
Revenue Bonds, Rancho Feliz Mobile Home Park,
Series 2003A, 5.750%, 9/15/38
700 Rohnert Park Finance Authority, California, Subordinate Lien 9/13 at 100.00 N/R 722,043
Revenue Bonds, Rancho Feliz Mobile Home Park,
Series 2003B, 6.625%, 9/15/38
3,045 Yucaipa Redevelopment Agency, California, Mobile Home 5/11 at 102.00 N/R 3,275,232
Park Revenue Bonds, Rancho del Sol and Grandview,
Series 2001A, 6.750%, 5/15/36
------------------------------------------------------------------------------------------------------------------------------------
20,832 Total Housing/Multifamily 21,757,673
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 1.2% (0.8% OF TOTAL INVESTMENTS)
520 California Housing Finance Agency, Home Mortgage Revenue 2/16 at 100.00 AAA 543,956
Bonds, Series 2006H, 5.750%, 8/01/30 - FGIC Insured
(Alternative Minimum Tax)
1,930 California Housing Finance Agency, Home Mortgage Revenue 2/16 at 100.00 AA- 1,515,494
Bonds, Series 2007M, ROLS 11113-1, 5.501%, 8/01/31
(Alternative Minimum Tax) (IF)
575 California Rural Home Mortgage Finance Authority, 6/11 at 102.00 AAA 583,246
Mortgage-Backed Securities Program Single Family Mortgage
Revenue Bonds, Series 2001A, 5.650%, 12/01/31
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
3,025 Total Housing/Single Family 2,642,696
------------------------------------------------------------------------------------------------------------------------------------
44
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 1.9% (1.2% OF TOTAL INVESTMENTS)
$ 1,250 California Pollution Control Financing Authority, Solid Waste 1/16 at 102.00 BBB $ 1,195,050
Disposal Revenue Bonds, Waste Management Inc.,
Series 2002A, 5.000%, 1/01/22 (Alternative Minimum Tax)
3,175 California Statewide Communities Development Authority, No Opt. Call BB 2,877,344
Revenue Bonds, EnerTech Regional Biosolids Project,
Series 2007A, 5.500%, 12/01/33 (DD, Settling 9/06/07)
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
4,425 Total Industrials 4,072,394
------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CARE - 0.7% (0.5% OF TOTAL INVESTMENTS)
1,550 California Health Facilities Financing Authority, Cal-Mortgage 1/13 at 100.00 A+ 1,578,830
Insured Revenue Bonds, Northern California Retired Officers
Community Corporation - Paradise Valley Estates, Series 2002,
5.125%, 1/01/22
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 8.1% (5.3% OF TOTAL INVESTMENTS)
3,335 California State, General Obligation Bonds, Series 2006CD, 12/15 at 100.00 AA- 2,462,864
RITES 1502, 5.224%, 12/01/32 (Alternative Minimum Tax) (IF)
3,615 Colton Joint Unified School District, San Bernardino County, 8/12 at 102.00 AAA 3,922,709
California, General Obligation Bonds, Series 2002A,
5.500%, 8/01/22 - FGIC Insured
Contra Costa County Community College District, California,
General Obligation Bonds, Series 2002:
3,005 5.000%, 8/01/21 - FGIC Insured 8/12 at 100.00 AAA 3,115,133
3,300 5.000%, 8/01/22 - FGIC Insured 8/12 at 100.00 AAA 3,383,622
2,500 Hemet Unified School District, Riverside County, California, 8/15 at 100.00 AAA 2,223,050
General Obligation Bonds, Series 2007, 4.250%, 8/01/32 -
FSA Insured
2,000 Puerto Rico, General Obligation and Public Improvement Bonds, No Opt. Call AAA 2,237,840
Series 2001A, 5.500%, 7/01/20 - MBIA Insured
355 Roseville Joint Union High School District, Placer County, 8/15 at 100.00 AAA 366,101
California, General Obligation Bonds, Series 2006B,
5.000%, 8/01/27 - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
18,110 Total Tax Obligation/General 17,711,319
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 23.6% (15.5% OF TOTAL INVESTMENTS)
Beaumont Financing Authority, California, Local Agency Revenue
Bonds, Series 2004D:
650 5.500%, 9/01/24 9/14 at 102.00 N/R 659,906
385 5.800%, 9/01/35 9/14 at 102.00 N/R 392,704
1,240 Borrego Water District, California, Community Facilities 8/17 at 102.00 N/R 1,201,548
District 2007-1 Montesoro, Special Tax Bonds, Series 2007,
5.750%, 8/01/25
4,900 California State Public Works Board, Lease Revenue Bonds, 12/13 at 100.00 A 5,280,975
Department of Corrections, Series 2003C, 5.500%, 6/01/16
2,105 California, Economic Recovery Revenue Bonds, Series 2004A, 7/14 at 100.00 AA+ 2,243,256
5.000%, 7/01/15
1,200 Capistrano Unified School District, Orange County, California, 9/13 at 100.00 N/R 1,233,708
Special Tax Bonds, Community Facilities District 90-2 -
Talega, Series 2003, 6.000%, 9/01/33
435 Capistrano Unified School District, Orange County, California, 9/15 at 100.00 AAA 448,742
Special Tax Bonds, Community Facilities District, Series 2005,
5.000%, 9/01/24 - FGIC Insured
4,845 Encinitas Public Financing Authority, California, Lease Revenue 4/08 at 102.00 AAA 4,972,763
Bonds, Acquisition Project, Series 2001A, 5.250%, 4/01/31 -
MBIA Insured
750 Fontana, California, Special Tax Bonds, Sierra Community 9/14 at 100.00 N/R 771,330
Facilities District 22, Series 2004, 6.000%, 9/01/34
1,785 Hawthorne Community Redevelopment Agency, California, 9/16 at 100.00 AAA 1,849,082
Project Area 2 Tax Allocation Bonds, Series 2006,
5.250%, 9/01/36 - XLCA Insured
1,800 Hesperia Unified School District, San Bernardino County, 2/17 at 100.00 AAA 1,811,340
California, Certificates of Participation, Capital Improvement,
Series 2007, 5.000%, 2/01/41 - AMBAC Insured
45
NVX
Nuveen California Dividend Advantage Municipal Fund 2 (continued)
Portfolio of INVESTMENTS August 31, 2007
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED (continued)
Irvine, California, Unified School District, Community Facilities
District Special Tax Bonds, Series 2006A:
$ 215 5.000%, 9/01/26 9/16 at 100.00 N/R $ 206,712
495 5.125%, 9/01/36 9/16 at 100.00 N/R 468,592
2,000 Lake Elsinore Public Finance Authority, California, Local Agency 10/13 at 102.00 N/R 2,116,540
Revenue Refunding Bonds, Series 2003H, 6.000%, 10/01/20
415 Lammersville School District, San Joaquin County, California, 9/16 at 100.00 N/R 390,926
Community Facilities District 2002, Mountain House Special
Tax Bonds, Series 2006, 5.125%, 9/01/35
1,265 Lee Lake Water District, Riverside County, California, Special 9/13 at 102.00 N/R 1,363,012
Tax Bonds, Community Facilities District 1 of Sycamore
Creek, Series 2003, 6.500%, 9/01/24
800 Los Angeles Community Redevelopment Agency, California, 9/15 at 100.00 Aaa 804,976
Lease Revenue Bonds, Manchester Social Services Project,
Series 2005, 5.000%, 9/01/37 - AMBAC Insured
8,000 Los Angeles County Metropolitan Transportation Authority, 7/08 at 101.00 AAA 8,116,160
California, Proposition C Second Senior Lien Sales Tax Revenue
Refunding Bonds, Series 1998A, 5.000%, 7/01/23 -
AMBAC Insured
Los Angeles, California, Municipal Improvement Corporation,
Lease Revenue Bonds, Police Headquarters, Series 2006A:
4,000 5.000%, 1/01/25 - FGIC Insured 1/17 at 100.00 AAA 4,130,800
2,500 4.500%, 1/01/37 - FGIC Insured 1/17 at 100.00 AAA 2,314,000
500 North Natomas Community Facilities District 4, Sacramento, 9/14 at 102.00 N/R 467,930
California, Special Tax Bonds, Series 2006D, 5.000%, 9/01/33
2,000 Orange County, California, Special Tax Bonds, Community 8/11 at 101.00 N/R 2,007,580
Facilities District 02-1 of Ladera Ranch, Series 2003A,
5.550%, 8/15/33
385 Rialto Redevelopment Agency, California, Tax Allocation Bonds, 9/15 at 100.00 AAA 389,940
Merged Project Area, Series 2005A, 5.000%, 9/01/35 -
XLCA Insured
475 Roseville, California, Certificates of Participation, 8/13 at 100.00 AAA 482,880
Public Facilities, Series 2003A, 5.000%, 8/01/25 -
AMBAC Insured
700 Sacramento, California, Special Tax Bonds, North Natomas 9/14 at 100.00 N/R 722,365
Community Facilities District 4, Series 2003C, 6.000%, 9/01/33
1,530 San Marcos Public Facilities Authority, California, Tax Allocation 8/15 at 100.00 AAA 1,554,434
Bonds, Project Areas 2 and 3, Series 2005C, 5.000%, 8/01/35 -
AMBAC Insured
1,330 Washington Unified School District, Yolo County, California, 8/17 at 100.00 AAA 1,361,095
Certificates of Participation, Series 2007, 5.125%, 8/01/37 -
AMBAC Insured
1,930 West Patterson Financing Authority, California, Special Tax 9/13 at 103.00 N/R 2,098,759
Bonds, Community Facilities District 01-1, Series 2003B,
6.750%, 9/01/30
500 West Patterson Financing Authority, California, Special Tax 9/13 at 102.00 N/R 514,865
Bonds, Community Facilities District 01-1, Series 2004B,
6.000%, 9/01/39
850 West Patterson Financing Authority, California, Special Tax 9/13 at 103.00 N/R 886,091
Bonds, Community Facilities District 2001-1, Series 2004A,
6.125%, 9/01/39
------------------------------------------------------------------------------------------------------------------------------------
49,985 Total Tax Obligation/Limited 51,263,011
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 10.4% (6.8% OF TOTAL INVESTMENTS)
1,930 Bay Area Toll Authority, California, Revenue Bonds, San Francisco 4/16 at 100.00 AA 1,984,851
Bay Area Toll Bridge, Series 2006, 5.000%, 4/01/31
7,000 Foothill/Eastern Transportation Corridor Agency, California, 1/14 at 101.00 BBB- 6,514,900
Toll Road Revenue Refunding Bonds, Series 1999,
0.000%, 1/15/27
5,585 Port of Oakland, California, Revenue Bonds, Series 2002N, 11/12 at 100.00 AAA 5,777,683
5.000%, 11/01/16 - MBIA Insured (Alternative Minimum Tax)
San Francisco Airports Commission, California, Revenue Bonds,
San Francisco International Airport, Second Series 2003, Issue 29A:
2,430 5.250%, 5/01/18 - FGIC Insured (Alternative Minimum Tax) 5/13 at 100.00 AAA 2,520,104
2,555 5.250%, 5/01/19 - FGIC Insured (Alternative Minimum Tax) 5/13 at 100.00 AAA 2,640,720
46
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION (continued)
$ 1,000 San Francisco Airports Commission, California, Revenue Bonds, 5/13 at 100.00 AAA $ 1,048,630
San Francisco International Airport, Second Series 2003,
Issue 29B, 5.125%, 5/01/17 - FGIC Insured
2,000 San Francisco Airports Commission, California, Revenue 5/12 at 100.00 AAA 2,075,760
Refunding Bonds, San Francisco International Airport,
Second Series 2002, Issue 28A, 5.250%, 5/01/17 -
MBIA Insured (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
22,500 Total Transportation 22,562,648
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 42.1% (27.6% OF TOTAL INVESTMENTS) (4)
9,000 Anitoch Area Public Facilities Financing Agency, California, 8/11 at 100.00 AAA 9,547,109
Special Tax Bonds, Community Facilities District 1989-1,
Series 2001, 5.250%, 8/01/25 (Pre-refunded 8/01/11) -
MBIA Insured
6,000 California Department of Water Resources, Power Supply 5/12 at 101.00 Aaa 6,437,100
Revenue Bonds, Series 2002A, 5.125%, 5/01/18
(Pre-refunded 5/01/12)
3,000 Central California Joint Powers Health Finance Authority, 2/10 at 101.00 AAA 3,193,920
Certificates of Participation, Community Hospitals of
Central California Obligated Group, Series 2000,
6.000%, 2/01/30 (Pre-refunded 2/01/10)
4,900 East Bay Municipal Utility District, Alameda and Contra 6/11 at 100.00 AAA 5,143,285
Costa Counties, California, Water System Subordinated
Revenue Bonds, Series 2001, 5.000%, 6/01/26
(Pre-refunded 6/01/11) - MBIA Insured
3,200 Golden State Tobacco Securitization Corporation, California, 6/13 at 100.00 AAA 3,506,464
Tobacco Settlement Asset-Backed Bonds, Series 2003A-1,
6.250%, 6/01/33 (Pre-refunded 6/01/13)
1,170 Lincoln, California, Special Tax Bonds, Lincoln Crossing 9/13 at 102.00 N/R (4) 1,353,386
Community Facilities District 03-1, Series 2003A,
6.500%, 9/01/25 (Pre-refunded 9/01/13)
885 Lincoln, California, Special Tax Bonds, Lincoln Crossing 9/13 at 102.00 N/R (4) 1,000,209
Community Facilities District 03-1, Series 2004,
6.000%, 9/01/34 (Pre-refunded 9/01/13)
7,530 Los Angeles Unified School District, California, General Obligation 7/10 at 100.00 AAA 7,897,991
Bonds, Series 2000D, 5.375%, 7/01/25 (Pre-refunded
7/01/10) - FGIC Insured
10,840 Los Angeles Unified School District, California, General Obligation 7/12 at 100.00 AAA 11,519,559
Bonds, Series 2002E, 5.000%, 7/01/19 (Pre-refunded 7/01/12) -
MBIA Insured
1,250 Los Angeles Unified School District, California, General Obligation 7/13 at 100.00 AAA 1,350,413
Bonds, Series 2003A, 5.250%, 7/01/20 (Pre-refunded 7/01/13) -
FSA Insured
3,000 Northern California Tobacco Securitization Authority, Tobacco 6/11 at 100.00 AAA 3,184,860
Settlement Asset-Backed Bonds, Series 2001A, 5.375%, 6/01/41
(Pre-refunded 6/01/11)
2,000 Puerto Rico Public Finance Corporation, Commonwealth No Opt. Call BBB- (4) 2,363,740
Appropriation Bonds, Series 2002E, 6.000%, 8/01/26 (ETM)
6,000 Riverside County Redevelopment Agency, California, Tax 10/11 at 102.00 AAA 6,484,740
Allocation Bonds, Jurupa Valley Project Area, Series 2001,
5.250%, 10/01/35 (Pre-refunded 10/01/11) - AMBAC Insured
12,090 Santa Clara Valley Transportation Authority, California, 6/11 at 100.00 AAA 12,690,267
Sales Tax Revenue Bonds, Series 2001A, 5.000%, 6/01/25
(Pre-refunded 6/01/11) - MBIA Insured
4,050 Santa Rosa High School District, Sonoma County, California, 5/11 at 101.00 AAA 4,324,469
General Obligation Bonds, Series 2001, 5.300%, 5/01/26
(Pre-refunded 5/01/11) - FGIC Insured
6,200 Southwestern Community College District, San Diego County, 8/11 at 101.00 AAA 6,658,986
California, General Obligation Bonds, Series 2001,
5.375%, 8/01/25 (Pre-refunded 8/01/11) - AMBAC Insured
2,800 Tobacco Securitization Authority of Southern California, 6/12 at 100.00 AAA 3,028,564
Tobacco Settlement Asset-Backed Bonds, San Diego County
Tobacco Asset Securitization Corporation, Senior Series 2001A,
5.500%, 6/01/36 (Pre-refunded 6/01/12)
1,500 Whittier, California, Health Facility Revenue Bonds, Presbyterian 6/12 at 101.00 A+ (4) 1,641,585
Intercommunity Hospital, Series 2002, 5.600%, 6/01/22
(Pre-refunded 6/01/12)
------------------------------------------------------------------------------------------------------------------------------------
85,415 Total U.S. Guaranteed 91,326,647
------------------------------------------------------------------------------------------------------------------------------------
47
NVX
Nuveen California Dividend Advantage Municipal Fund 2 (continued)
Portfolio of INVESTMENTS August 31, 2007
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 4.5% (2.9% OF TOTAL INVESTMENTS)
$ 5,000 Anaheim Public Finance Authority, California, Second Lien 10/14 at 100.00 AAA $ 5,273,150
Electric Distribution Revenue Bonds, Series 2004,
5.250%, 10/01/21 - MBIA Insured
1,000 Los Angeles Department of Water and Power, California, 7/13 at 100.00 AAA 1,027,410
Power System Revenue Bonds, Series 2003A-2,
5.000%, 7/01/23 - MBIA Insured
500 Los Angeles Department of Water and Power, California, 7/15 at 100.00 AAA 513,165
Power System Revenue Bonds, Series 2005A-1,
5.000%, 7/01/31 - FSA Insured
790 Merced Irrigation District, California, Electric System Revenue 9/15 at 100.00 AAA 809,260
Bonds, Series 2005, 5.125%, 9/01/31 - XLCA Insured
2,000 Santa Clara, California, Subordinate Electric Revenue Bonds, 7/13 at 100.00 AAA 2,120,800
Series 2003A, 5.250%, 7/01/20 - MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
9,290 Total Utilities 9,743,785
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 10.5% (6.9% OF TOTAL INVESTMENTS)
1,400 Castaic Lake Water Agency, California, Revenue Certificates 8/16 at 100.00 AAA 1,418,536
of Participation, Series 2006C, 5.000%, 8/01/36 - MBIA Insured
2,655 El Dorado Irrigation District, California, Water and Sewer 3/14 at 100.00 AAA 2,751,031
Certificates of Participation, Series 2004A, 5.000%, 3/01/20 -
FGIC Insured
545 Healdsburg Public Financing Authority, California, Wastewater 4/16 at 100.00 AAA 556,609
Revenue Bonds, Series 2006, 5.000%, 4/01/36 - MBIA Insured
750 Sacramento County Sanitation District Financing Authority, 6/16 at 100.00 AAA 774,360
California, Revenue Bonds, Series 2006, 5.000%, 12/01/31 -
FGIC Insured
1,700 San Buenaventura, California, Wastewater Revenue Certificates 3/14 at 100.00 AAA 1,740,222
of Participation, Series 2004, 5.000%, 3/01/24 - MBIA Insured
4,785 San Diego Public Facilities Financing Authority, California, 8/12 at 100.00 AAA 4,960,370
Subordinate Lien Water Revenue Bonds, Series 2002,
5.000%, 8/01/21 - MBIA Insured
10,000 San Francisco City and County Public Utilities Commission, 4/13 at 100.00 AAA 10,591,399
California, Clean Water Revenue Refunding Bonds,
Series 2003A, 5.250%, 10/01/20 - MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
21,835 Total Water and Sewer 22,792,527
------------------------------------------------------------------------------------------------------------------------------------
$ 326,957 Total Investments (cost $323,736,433) - 152.5% 331,473,854
=============-----------------------------------------------------------------------------------------------------------------------
Floating Rate Obligations - (2.8)% (6,171,000)
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.9% 2,028,894
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (50.6)% (110,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 217,331,748
====================================================================================================================
48
FORWARD SWAPS OUTSTANDING AT AUGUST 31, 2007:
FUND FIXED RATE UNREALIZED
NOTIONAL PAY/RECEIVE FLOATING RATE FIXED RATE PAYMENT EFFECTIVE TERMINATION APPRECIATION
COUNTERPARTY AMOUNT FLOATING RATE INDEX (ANNUALIZED) FREQUENCY DATE (5) DATE (DEPRECIATION)
------------------------------------------------------------------------------------------------------------------------------------
Citigroup
Inc. $4,500,000 Pay 3-Month USD-LIBOR 5.808% Semi-Annually 7/01/08 7/01/33 $206,514
JPMorgan 7,000,000 Pay SIFM 4.376 Quarterly 8/06/08 8/06/37 189,937
------------------------------------------------------------------------------------------------------------------------------------
$396,451
====================================================================================================================================
USD-LIBOR (United States Dollar-London Inter-Bank Offered Rate)
SIFM - The daily arithmetic average of the weekly SIFM (the Securities Industry
and Financial Markets) Municipal Swap Index.
The Fund may invest in "zero coupon" securities. A zero
coupon security does not pay a regular interest coupon to
its holders during the life of the security. Tax-exempt
income to the holder of the security comes from accretion of
the difference between the original purchase price of the
security at issuance and the par value of the security at
maturity and is effectively paid at maturity. Such
securities are included in the Portfolio of Investments with
a 0.000% coupon rate in their description. The market prices
of zero coupon securities generally are more volatile than
the market prices of securities that pay interest
periodically.
(1) All percentages shown in the Portfolio of Investments are
based on net assets applicable to Common shares unless
otherwise noted.
(2) Optional Call Provisions (not covered by the report of
independent registered public accounting firm): Dates (month
and year) and prices of the earliest optional call or
redemption. There may be other call provisions at varying
prices at later dates. Certain mortgage-backed securities
may be subject to periodic principal paydowns.
(3) Ratings (not covered by the report of independent registered
public accounting firm): Using the higher of Standard &
Poor's or Moody's rating. Ratings below BBB by Standard &
Poor's Group or Baa by Moody's Investor Service, Inc. are
considered to be below investment grade.
(4) Backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities which ensure
the timely payment of principal and interest. Such
investments are normally considered to be equivalent to AAA
rated securities.
(5) Effective date represents the date on which both the Fund
and counterparty commence interest payment accruals on each
forward swap contract.
N/R Not rated.
DD Portion of investment purchased on a delayed delivery basis.
(IF) Inverse floating rate investment.
(UB) Underlying bond of an inverse floating rate trust reflected
as a financing transaction pursuant to the provisions of
SFAS No. 140.
See accompanying notes to financial statements.
49
NZH
Nuveen California Dividend Advantage Municipal Fund 3
Portfolio of INVESTMENTS
August 31, 2007
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 6.0% (3.9% OF TOTAL INVESTMENTS)
$ 1,260 California County Tobacco Securitization Agency, Tobacco 6/15 at 100.00 BBB $ 1,168,184
Settlement Asset-Backed Bonds, Sonoma County Tobacco
Securitization Corporation, Series 2005, 4.250%, 6/01/21
29,660 Golden State Tobacco Securitization Corporation, California, 6/22 at 100.00 BBB 19,513,905
Enhanced Tobacco Settlement Asset-Backed Bonds,
Series 2007A-2, 0.000%, 6/01/37
------------------------------------------------------------------------------------------------------------------------------------
30,920 Total Consumer Staples 20,682,089
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 4.1% (2.6% OF TOTAL INVESTMENTS)
290 California Educational Facilities Authority, Revenue Bonds, 10/15 at 100.00 A3 284,832
University of Redlands, Series 2005A, 5.000%, 10/01/35
California Educational Facilities Authority, Revenue Bonds,
University of the Pacific, Series 2006:
200 5.000%, 11/01/21 11/15 at 100.00 A2 205,864
270 5.000%, 11/01/25 11/15 at 100.00 A2 274,598
3,825 California Educational Facilities Authority, Student Loan 3/08 at 102.00 Aaa 3,906,281
Revenue Bonds, Cal Loan Program, Series 2001A,
5.400%, 3/01/21 - MBIA Insured (Alternative Minimum Tax)
3,600 California State Public Works Board, Lease Revenue Bonds, 10/12 at 100.00 AAA 3,842,928
University of California, UCLA Replacement Hospital Project,
Series 2002A, 5.375%, 10/01/17 - FSA Insured
620 California Statewide Community Development Authority, 10/13 at 100.00 N/R 659,711
Revenue Bonds, Notre Dame de Namur University,
Series 2003, 6.500%, 10/01/23
765 California Statewide Community Development Authority, 10/15 at 100.00 BBB- 689,594
Revenue Bonds, Thomas Jefferson School of Law,
Series 2005A, 4.875%, 10/01/31
4,000 University of California, Revenue Bonds, Multi-Purpose Projects, 5/13 at 100.00 AAA 4,107,480
Series 2003A, 5.000%, 5/15/23 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
13,570 Total Education and Civic Organizations 13,971,288
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 27.0% (17.3% OF TOTAL INVESTMENTS)
California Health Facilities Financing Authority, Revenue Bonds,
Casa Colina Inc., Series 2001:
4,000 6.000%, 4/01/22 4/12 at 100.00 BBB+ 4,132,920
2,000 6.125%, 4/01/32 4/12 at 100.00 BBB+ 2,064,620
4,005 California Health Facilities Financing Authority, Revenue Bonds, 11/15 at 100.00 A2 3,984,054
Cedars-Sinai Medical Center, Series 2005, 5.000%, 11/15/34
8,470 California Health Facilities Financing Authority, Revenue Bonds, 11/16 at 100.00 AA- 8,952,790
Sutter Health, Series 2007A, Residuals 1802,
7.195%, 11/15/46 (IF)
11,895 California Health Facilities Financing Authority, Revenue Bonds, 11/16 at 100.00 AA- 12,107,802
Sutter Health, Series 2007A, 5.250%, 11/15/46 (UB)
9,000 California Infrastructure Economic Development Bank, Revenue 8/11 at 102.00 A+ 9,210,150
Bonds, Kaiser Hospital Assistance LLC, Series 2001A,
5.550%, 8/01/31
1,575 California Statewide Communities Development Authority, 7/17 at 100.00 N/R 1,431,801
Revenue Bonds, ValleyCare Health System, Series 2007A,
5.125%, 7/15/31
6,525 California Statewide Community Development Authority, No Opt. Call A+ 7,072,839
Health Facility Revenue Refunding Bonds, Memorial Health
Services, Series 2003A, 6.000%, 10/01/12
6,450 California Statewide Community Development Authority, 6/13 at 100.00 AAA 6,785,981
Hospital Revenue Bonds, Monterey Peninsula Hospital,
Series 2003B, 5.250%, 6/01/18 - FSA Insured
50
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE (continued)
$ 7,665 California Statewide Community Development Authority, 11/09 at 102.00 A+ $ 7,881,536
Insured Mortgage Hospital Revenue Bonds, Mission Community
Hospital, Series 2001, 5.375%, 11/01/21
10,095 California Statewide Community Development Authority, Revenue 3/16 at 100.00 A+ 9,752,981
Bonds, Kaiser Permanante System, Series 2006,
5.000%, 3/01/41
3,145 California Statewide Community Development Authority, Revenue 8/16 at 100.00 A+ 3,174,940
Bonds, Kaiser Permanente System, Series 2001C,
5.250%, 8/01/31
3,000 California Statewide Community Development Authority, Revenue 4/17 at 100.00 A+ 2,776,140
Bonds, Kaiser Permanente System, Series 2007A,
4.750%, 4/01/33
Rancho Mirage Joint Powers Financing Authority, California,
Revenue Bonds, Eisenhower Medical Center, Series 2007A:
8,310 5.000%, 7/01/38 7/17 at 100.00 A3 8,080,312
5,540 5.000%, 7/01/47 7/17 at 100.00 A3 5,321,779
------------------------------------------------------------------------------------------------------------------------------------
91,675 Total Health Care 92,730,645
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 6.7% (4.3% OF TOTAL INVESTMENTS)
4,000 ABAG Finance Authority for Non-Profit Corporations, California, No Opt. Call BBB 4,074,320
Multifamily Housing Revenue Refunding Bonds, United
Dominion/2000 Post Apartments, Series 2000B, 6.250%, 8/15/30
(Mandatory put 8/15/08)
5,115 California Statewide Community Development Authority, 8/12 at 105.00 Aaa 5,562,511
GNMA Collateralized Housing Revenue Refunding Bonds,
Crowne Pointe Project, Series 2002F, 6.750%, 8/20/37
2,000 Daly City Housing Development Finance Agency, California, 12/13 at 102.00 A- 2,040,260
Mobile Home Park Revenue Bonds, Franciscan Mobile
Home Park Project, Series 2002A, 5.800%, 12/15/25
325 Independent Cities Lease Finance Authority, California, 5/16 at 100.00 N/R 304,148
Mobile Home Park Revenue Bonds, San Juan Mobile Estates,
Series 2006B, 5.850%, 5/15/41
1,735 Rohnert Park Finance Authority, California, Senior Lien Revenue 9/13 at 100.00 A+ 1,755,647
Bonds, Rancho Feliz Mobile Home Park, Series 2003A,
5.750%, 9/15/38
1,125 Rohnert Park Finance Authority, California, Subordinate Lien 9/13 at 100.00 N/R 1,160,426
Revenue Bonds, Rancho Feliz Mobile Home Park, Series 2003B,
6.625%, 9/15/38
3,610 San Bernardino County Housing Authority, California, GNMA 11/11 at 105.00 Aaa 3,851,545
Collateralized Multifamily Mortgage Revenue Bonds, Pacific
Palms Mobile Home Park, Series 2001A, 6.700%, 12/20/41
San Jose, California, Multifamily Housing Revenue Bonds, GNMA
Mortgage-Backed Securities Program, Lenzen Housing, Series
2001B:
1,250 5.350%, 2/20/26 (Alternative Minimum Tax) 8/11 at 102.00 AAA 1,266,200
2,880 5.450%, 2/20/43 (Alternative Minimum Tax) 8/11 at 102.00 AAA 2,898,144
------------------------------------------------------------------------------------------------------------------------------------
22,040 Total Housing/Multifamily 22,913,201
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 2.2% (1.4% OF TOTAL INVESTMENTS)
855 California Housing Finance Agency, Home Mortgage Revenue 2/16 at 100.00 AAA 894,390
Bonds, Series 2006H, 5.750%, 8/01/30 - FGIC Insured
(Alternative Minimum Tax)
8,490 California Housing Finance Agency, Home Mortgage Revenue 2/16 at 100.00 Aa2 6,666,603
Bonds, Series 2007M, ROLS 11113-1, 5.501%, 8/01/26
(Alternative Minimum Tax) (IF)
------------------------------------------------------------------------------------------------------------------------------------
9,345 Total Housing/Single Family 7,560,993
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 1.9% (1.2% OF TOTAL INVESTMENTS)
2,000 California Pollution Control Financing Authority, Solid Waste 1/16 at 102.00 BBB 1,912,080
Disposal Revenue Bonds, Waste Management Inc.,
Series 2002A, 5.000%, 1/01/22 (Alternative Minimum Tax)
5,205 California Statewide Communities Development Authority, No Opt. Call BB 4,717,031
Revenue Bonds, EnerTech Regional Biosolids Project,
Series 2007A, 5.500%, 12/01/33 (DD, Settling 9/06/07)
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
7,205 Total Industrials 6,629,111
------------------------------------------------------------------------------------------------------------------------------------
51
NZH
Nuveen California Dividend Advantage Municipal Fund 3 (continued)
Portfolio of INVESTMENTS August 31, 2007
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CARE - 1.6% (1.0% OF TOTAL INVESTMENTS)
$ 2,450 California Health Facilities Financing Authority, Cal-Mortgage 1/13 at 100.00 A+ $ 2,495,570
Insured Revenue Bonds, Northern California Retired Officers
Community Corporation - Paradise Valley Estates, Series 2002,
5.125%, 1/01/22
California Health Facilities Financing Authority, Insured Senior
Living Revenue Bonds, Aldersly Project, Series 2002A:
1,500 5.125%, 3/01/22 3/12 at 101.00 A+ 1,528,770
1,315 5.250%, 3/01/32 3/12 at 101.00 A+ 1,331,398
------------------------------------------------------------------------------------------------------------------------------------
5,265 Total Long-Term Care 5,355,738
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 19.5% (12.5% OF TOTAL INVESTMENTS)
California State, General Obligation Bonds, Series 2007:
7,650 4.250%, 8/01/33 - MBIA Insured 2/17 at 100.00 AAA 6,877,733
6,000 4.250%, 12/01/35 - AMBAC Insured 12/16 at 100.00 AAA 5,333,400
9,335 California, General Obligation Bonds, Series 2002, No Opt. Call AAA 10,674,946
6.000%, 2/01/16 - FSA Insured
10 California, General Obligation Veterans Welfare Bonds, 12/07 at 101.00 AA- 10,112
Series 1997BJ, 5.500%, 12/01/18 (Alternative Minimum Tax)
14,300 California, General Obligation Veterans Welfare Bonds, 12/07 at 101.00 AAA 14,373,072
Series 2001BZ, 5.350%, 12/01/21 - MBIA Insured
(Alternative Minimum Tax)
3,000 Contra Costa County Community College District, California, 8/12 at 100.00 AAA 3,070,710
General Obligation Bonds, Series 2002, 5.000%, 8/01/23 -
FGIC Insured
2,500 Fullerton Joint Union High School District, Orange County, 8/12 at 100.00 Aaa 2,547,925
California, General Obligation Bonds, Series 2002A,
5.000%, 8/01/23 - FSA Insured
2,260 Jurupa Unified School District, Riverside County, California, 8/11 at 101.00 AAA 2,339,529
General Obligation Bonds, Series 2002, 5.125%, 8/01/22 -
FGIC Insured
870 Puerto Rico, General Obligation and Public Improvement Bonds, 7/11 at 100.00 AAA 886,330
Series 2001, 5.000%, 7/01/24 - FSA Insured
575 Roseville Joint Union High School District, Placer County, 8/15 at 100.00 AAA 592,980
California, General Obligation Bonds, Series 2006B,
5.000%, 8/01/27 - FGIC Insured
10,810 San Diego Unified School District, San Diego County, 7/11 at 102.00 AAA 11,465,086
California, General Obligation Bonds, Election of 1998,
Series 2001C, 5.000%, 7/01/26 - FSA Insured
4,000 San Diego Unified School District, San Diego County, 7/12 at 101.00 AAA 4,295,280
California, General Obligation Bonds, Election of 1998,
Series 2002D, 5.250%, 7/01/21 - FGIC Insured
2,715 San Jose-Evergreen Community College District, 9/15 at 100.00 AAA 2,808,125
Santa Clara County, California, General Obligation Bonds,
Series 2005A, 5.000%, 9/01/25 - MBIA Insured
1,630 West Contra Costa Unified School District, Contra Costa 8/11 at 101.00 AAA 1,671,304
County, California, General Obligation Bonds, Series 2003C,
5.000%, 8/01/22 - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
65,655 Total Tax Obligation/General 66,946,532
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 39.2% (25.3% OF TOTAL INVESTMENTS)
2,040 Borrego Water District, California, Community Facilities 8/17 at 102.00 N/R 1,976,740
District 2007-1 Montesoro, Special Tax Bonds, Series 2007,
5.750%, 8/01/25
7,135 Brentwood Infrastructure Financing Authority, Contra Costa 11/11 at 100.00 AAA 7,260,576
County, California, Capital Improvement Revenue Bonds,
Series 2001, 5.000%, 11/01/25 - FSA Insured
8,210 California State Public Works Board, Lease Revenue Bonds, 12/13 at 100.00 A 8,848,328
Department of Corrections, Series 2003C, 5.500%, 6/01/16
3,350 California State Public Works Board, Lease Revenue Bonds, 12/12 at 100.00 AAA 3,570,966
Department of General Services, Capital East End Project,
Series 2002A, 5.250%, 12/01/17 - AMBAC Insured
4,000 California State Public Works Board, Lease Revenue Bonds, 3/12 at 100.00 AAA 4,071,680
Department of General Services, Series 2002B,
5.000%, 3/01/27 - AMBAC Insured
4,510 California State Public Works Board, Lease Revenue Bonds, 12/11 at 102.00 AAA 4,611,610
Department of Mental Health, Hospital Addition, Series 2001A,
5.000%, 12/01/26 - AMBAC Insured
52
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED (continued)
Capistrano Unified School District, Orange County, California,
Special Tax Bonds, Community Facilities District 90-2 - Talega,
Series 2003:
$ 1,750 5.875%, 9/01/23 9/13 at 100.00 N/R $ 1,810,673
550 6.000%, 9/01/33 9/13 at 100.00 N/R 565,450
715 Capistrano Unified School District, Orange County, California, 9/15 at 100.00 AAA 737,587
Special Tax Bonds, Community Facilities District, Series 2005,
5.000%, 9/01/24 - FGIC Insured
2,160 Chino Redevelopment Agency, California, Merged Chino 9/16 at 101.00 AAA 2,220,782
Redevelopment Project Area Tax Allocation Bonds, Series 2006,
5.000%, 9/01/38 - AMBAC Insured
1,125 Fontana, California, Special Tax Bonds, Sierra Community 9/14 at 100.00 N/R 1,156,995
Facilities District 22, Series 2004, 6.000%, 9/01/34
1,000 Fullerton Community Facilities District 1, California, Special 9/12 at 100.00 N/R 1,037,270
Tax Bonds, Amerige Heights, Series 2002, 6.100%, 9/01/22
5,000 Golden State Tobacco Securitization Corporation, California, 6/15 at 100.00 AAA 5,039,550
Tobacco Settlement Asset-Backed Revenue Bonds,
Series 2005A, 5.000%, 6/01/45 - AMBAC Insured
Irvine, California, Unified School District, Community Facilities
District Special Tax Bonds, Series 2006A:
350 5.000%, 9/01/26 9/16 at 100.00 N/R 336,508
805 5.125%, 9/01/36 9/16 at 100.00 N/R 762,053
3,000 Lake Elsinore Public Finance Authority, California, Local Agency 10/13 at 102.00 N/R 3,174,810
Revenue Refunding Bonds, Series 2003H, 6.000%, 10/01/20
685 Lammersville School District, San Joaquin County, California, 9/16 at 100.00 N/R 645,263
Community Facilities District 2002, Mountain House Special
Tax Bonds, Series 2006, 5.125%, 9/01/35
5,250 Lammersville School District, San Joaquin County, California, 9/12 at 101.00 N/R 5,534,708
Special Tax Bonds, Community Facilities District of Mountain
House, Series 2002, 6.300%, 9/01/24
2,000 Lee Lake Water District, Riverside County, California, Special 9/13 at 102.00 N/R 2,154,960
Tax Bonds, Community Facilities District 1 of Sycamore Creek,
Series 2003, 6.500%, 9/01/24
1,000 Lindsay Redevelopment Agency, California, Project 1 Tax Allocation 8/17 at 100.00 AA 907,300
Bonds, Series 2007, 5.000%, 8/01/37 - RAAI Insured
5,425 Lodi, California, Certificates of Participation, Public Improvement 10/12 at 100.00 AAA 5,517,225
Financing Project, Series 2002, 5.000%, 10/01/26 - MBIA Insured
1,310 Los Angeles Community Redevelopment Agency, California, 9/15 at 100.00 Aaa 1,318,148
Lease Revenue Bonds, Manchester Social Services Project,
Series 2005, 5.000%, 9/01/37 - AMBAC Insured
1,675 Moreno Valley Unified School District, Riverside County, 3/14 at 100.00 AAA 1,702,403
California, Certificates of Participation, Series 2005,
5.000%, 3/01/26 - FSA Insured
North Natomas Community Facilities District 4, Sacramento,
California, Special Tax Bonds, Series 2006D:
550 5.000%, 9/01/26 9/14 at 102.00 N/R 525,635
250 5.000%, 9/01/33 9/14 at 102.00 N/R 233,965
3,000 Oakland Redevelopment Agency, California, Subordinate Lien 3/13 at 100.00 AAA 3,224,040
Tax Allocation Bonds, Central District Redevelopment Project,
Series 2003, 5.500%, 9/01/19 - FGIC Insured
4,520 Ontario Redevelopment Financing Authority, California, 8/11 at 101.00 AAA 4,636,074
Lease Revenue Bonds, Capital Projects, Series 2001,
5.000%, 8/01/24 - AMBAC Insured
2,000 Orange County, California, Special Tax Bonds, Community 8/11 at 101.00 N/R 2,007,580
Facilities District 02-1 of Ladera Ranch, Series 2003A,
5.550%, 8/15/33
11,165 Palm Desert Financing Authority, California, Tax Allocation 4/12 at 102.00 AAA 11,456,183
Revenue Refunding Bonds, Project Area 1, Series 2002,
5.100%, 4/01/30 - MBIA Insured
3,250 Pomona Public Financing Authority, California, Revenue 2/11 at 100.00 AAA 3,289,520
Refunding Bonds, Merged Redevelopment Projects,
Series 2001AD, 5.000%, 2/01/27 - MBIA Insured
6,000 Puerto Rico Highway and Transportation Authority, Highway No Opt. Call AAA 6,546,960
Revenue Bonds, Series 2007N, 5.250%, 7/01/39 - FGIC Insured
53
NZH
Nuveen California Dividend Advantage Municipal Fund 3 (continued)
Portfolio of INVESTMENTS August 31, 2007
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED (continued)
$ 625 Rialto Redevelopment Agency, California, Tax Allocation Bonds, 9/15 at 100.00 AAA $ 633,019
Merged Project Area, Series 2005A, 5.000%, 9/01/35 -
XLCA Insured
780 Roseville, California, Certificates of Participation, Public 8/13 at 100.00 AAA 792,940
Facilities, Series 2003A, 5.000%, 8/01/25 - AMBAC Insured
1,150 Sacramento, California, Special Tax Bonds, North Natomas 9/14 at 100.00 N/R 1,186,743
Community Facilities District 4, Series 2003C, 6.000%, 9/01/33
14,505 San Diego Redevelopment Agency, California, Subordinate 9/11 at 101.00 AAA 14,821,498
Lien Tax Allocation Bonds, Centre City Project, Series 2001A,
5.000%, 9/01/26 - FSA Insured
2,300 San Francisco Bay Area Rapid Transit District, California, 7/11 at 100.00 AAA 2,333,465
Sales Tax Revenue Bonds, Series 2001, 5.000%, 7/01/26 -
AMBAC Insured
8,710 South Orange County Public Financing Authority, California, 8/15 at 100.00 AAA 8,939,160
Special Tax Revenue Bonds, Ladera Ranch, Series 2005A,
5.000%, 8/15/32 - AMBAC Insured
2,810 West Patterson Financing Authority, California, Special Tax 9/13 at 103.00 N/R 3,105,949
Bonds, Community Facilities District 01-1, Series 2003B,
7.000%, 9/01/38
2,000 West Patterson Financing Authority, California, Special Tax 9/13 at 102.00 N/R 2,059,460
Bonds, Community Facilities District 01-1, Series 2004B,
6.000%, 9/01/39
1,375 West Patterson Financing Authority, California, Special Tax 9/13 at 103.00 N/R 1,433,383
Bonds, Community Facilities District 2001-1, Series 2004A,
6.125%, 9/01/39
2,500 Yucaipa-Calimesa Joint Unified School District, San Bernardino 10/11 at 100.00 AAA 2,534,875
County, California, General Obligation Refunding Bonds,
Series 2001A, 5.000%, 10/01/26 - MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
130,535 Total Tax Obligation/Limited 134,722,034
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 6.9% (4.5% OF TOTAL INVESTMENTS)
1,690 Bay Area Toll Authority, California, Revenue Bonds, San Francisco 4/16 at 100.00 AA 1,738,030
Bay Area Toll Bridge, Series 2006, 5.000%, 4/01/31
11,750 Foothill/Eastern Transportation Corridor Agency, California, 1/14 at 101.00 BBB- 10,927,853
Toll Road Revenue Refunding Bonds, Series 1999,
0.000%, 1/15/28
1,500 Port of Oakland, California, Revenue Refunding Bonds, 11/07 at 102.00 AAA 1,534,710
Series 1997I, 5.600%, 11/01/19 - MBIA Insured
San Francisco Airports Commission, California, Revenue Bonds,
San Francisco International Airport, Second Series 2003, Issue 29B:
4,110 5.125%, 5/01/17 - FGIC Insured 5/13 at 100.00 AAA 4,309,869
5,140 5.125%, 5/01/19 - FGIC Insured 5/13 at 100.00 AAA 5,348,838
------------------------------------------------------------------------------------------------------------------------------------
24,190 Total Transportation 23,859,300
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 26.4% (17.0% OF TOTAL INVESTMENTS) (4)
4,000 Beaumont Financing Authority, California, Local Agency Revenue 9/12 at 102.00 N/R (4) 4,596,080
Bonds, Series 2002A, 6.750%, 9/01/25 (Pre-refunded 9/01/12)
11,240 California County Tobacco Securitization Agency, Tobacco 6/12 at 100.00 Baa3 (4) 11,933,619
Settlement Asset-Backed Bonds, Merced County Tobacco
Funding Corporation, Series 2002A, 5.500%, 6/01/33
(Pre-refunded 6/01/12)
California Department of Water Resources, Power Supply Revenue
Bonds, Series 2002A:
3,500 5.375%, 5/01/17 (Pre-refunded 5/01/12) - XLCA Insured 5/12 at 101.00 AAA 3,792,250
9,000 5.125%, 5/01/18 (Pre-refunded 5/01/12) 5/12 at 101.00 Aaa 9,655,650
1,750 California, General Obligation Bonds, Series 2004, 2/14 at 100.00 A+ (4) 1,884,488
5.125%, 2/01/27 (Pre-refunded 2/01/14)
Central California Joint Powers Health Finance Authority,
Certificates of Participation, Community Hospitals of Central
California Obligated Group, Series 2000:
1,770 6.000%, 2/01/20 (Pre-refunded 2/01/10) 2/10 at 101.00 AAA 1,884,413
1,740 6.000%, 2/01/30 (Pre-refunded 2/01/10) 2/10 at 101.00 AAA 1,852,474
6,100 Golden State Tobacco Securitization Corporation, California, 6/13 at 100.00 AAA 6,684,197
Tobacco Settlement Asset-Backed Bonds, Series 2003A-1,
6.250%, 6/01/33 (Pre-refunded 6/01/13)
54
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED (4) (continued)
$ 1,940 Lincoln, California, Special Tax Bonds, Lincoln Crossing 9/13 at 102.00 N/R (4) $ 2,244,076
Community Facilities District 03-1, Series 2003A,
6.500%, 9/01/25 (Pre-refunded 9/01/13)
1,335 Lincoln, California, Special Tax Bonds, Lincoln Crossing 9/13 at 102.00 N/R (4) 1,508,790
Community Facilities District 03-1, Series 2004,
6.000%, 9/01/34 (Pre-refunded 9/01/13)
Los Angeles Unified School District, California, General
Obligation Bonds, Series 2003A:
3,750 5.250%, 7/01/20 (Pre-refunded 7/01/13) - FSA Insured 7/13 at 100.00 AAA 4,051,238
7,200 5.000%, 7/01/22 (Pre-refunded 7/01/13) - FSA Insured 7/13 at 100.00 AAA 7,684,776
1,525 Lucia Mar Unified School District, San Luis Obispo County, 8/14 at 100.00 Aaa 1,661,533
California, General Obligation Bonds, Series 2004A,
5.250%, 8/01/22 (Pre-refunded 8/01/14) - FGIC Insured
5,500 Puerto Rico Highway and Transportation Authority, Highway 7/12 at 100.00 AAA 5,902,765
Revenue Bonds, Series 2002D, 5.375%, 7/01/36
(Pre-refunded 7/01/12)
1,700 Roseville, California, Special Tax Bonds, Community Facilities 9/09 at 103.00 N/R (4) 1,818,847
District 1 - Crocker, Series 2003, 6.000%, 9/01/27
(Pre-refunded 9/01/09)
6,425 San Francisco Bay Area Rapid Transit District, California, 7/11 at 100.00 Aaa 6,749,977
Sales Tax Revenue Bonds, Series 2001, 5.000%, 7/01/26
(Pre-refunded 7/01/11) - AMBAC Insured
7,595 San Francisco State University Foundation Inc., California, 9/11 at 101.00 AAA 8,054,270
Auxiliary Organization Student Housing Revenue Bonds,
Series 2001, 5.000%, 9/01/26 (Pre-refunded 9/01/11) -
MBIA Insured
1,590 San Marcos Public Facilities Authority, California, Special Tax 9/09 at 102.00 N/R (4) 1,689,900
Bonds, Community Facilities District 99-1, Series 2003B,
6.000%, 9/01/24 (Pre-refunded 9/01/09)
4,200 Tobacco Securitization Authority of Southern California, 6/12 at 100.00 AAA 4,542,846
Tobacco Settlement Asset-Backed Bonds, San Diego County
Tobacco Asset Securitization Corporation, Senior Series 2001A,
5.500%, 6/01/36 (Pre-refunded 6/01/12)
2,500 Whittier, California, Health Facility Revenue Bonds, Presbyterian 6/12 at 101.00 A+ (4) 2,735,975
Intercommunity Hospital, Series 2002, 5.600%, 6/01/22
(Pre-refunded 6/01/12)
------------------------------------------------------------------------------------------------------------------------------------
84,360 Total U.S. Guaranteed 90,928,164
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 2.5% (1.6% OF TOTAL INVESTMENTS)
1,285 Merced Irrigation District, California, Electric System Revenue 9/15 at 100.00 AAA 1,316,328
Bonds, Series 2005, 5.125%, 9/01/31 - XLCA Insured
5,000 Merced Irrigation District, California, Revenue Certificates 9/13 at 102.00 Baa3 5,127,050
of Participation, Electric System Project, Series 2003,
5.700%, 9/01/36
2,250 Salinas Valley Solid Waste Authority, California, Revenue Bonds, 8/12 at 100.00 AAA 2,295,405
Series 2002, 5.125%, 8/01/22 - AMBAC Insured
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
8,535 Total Utilities 8,738,783
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 11.6% (7.4% OF TOTAL INVESTMENTS)
1,070 Burbank, California, Wastewater System Revenue Bonds, 6/14 at 100.00 AAA 1,101,084
Series 2004A, 5.000%, 6/01/22 - AMBAC Insured
7,000 Carmichael Water District, Sacramento County, California, 9/09 at 102.00 AAA 7,095,900
Water Revenue Certificates of Participation, Series 1999,
5.125%, 9/01/29 - MBIA Insured
1,125 Fortuna Public Finance Authority, California, Water Revenue 10/16 at 100.00 AAA 1,157,636
Bonds, Series 2006, 5.000%, 10/01/36 - FSA Insured
890 Healdsburg Public Financing Authority, California, Wastewater 4/16 at 100.00 AAA 908,957
Revenue Bonds, Series 2006, 5.000%, 4/01/36 - MBIA Insured
850 Marina Coast Water District, California, Enterprise Certificate 6/16 at 100.00 AAA 863,490
of Participation, Series 2006, 5.000%, 6/01/31 - MBIA Insured
1,000 Pico Rivera Water Authority, California, Revenue Bonds, 12/11 at 102.00 N/R 1,041,520
Series 2001A, 6.250%, 12/01/32
1,380 Sacramento County Sanitation District Financing Authority, 6/16 at 100.00 AAA 1,420,807
California, Revenue Bonds, Series 2006, 5.000%, 12/01/36 -
FGIC Insured
1,000 San Buenaventura, California, Wastewater Revenue Certificates 3/14 at 100.00 AAA 1,023,660
of Participation, Series 2004, 5.000%, 3/01/24 - MBIA Insured
55
NZH
Nuveen California Dividend Advantage Municipal Fund 3 (continued)
Portfolio of INVESTMENTS August 31, 2007
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER (continued)
San Diego Public Facilities Financing Authority, California,
Subordinate Lien Water Revenue Bonds, Series 2002:
$ 2,500 5.000%, 8/01/23 - MBIA Insured 8/12 at 100.00 AAA $ 2,558,925
6,260 5.000%, 8/01/24 - MBIA Insured 8/12 at 100.00 AAA 6,396,468
San Francisco City and County Public Utilities Commission,
California, Clean Water Revenue Refunding Bonds, Series 2003A:
3,315 5.250%, 10/01/18 - MBIA Insured 4/13 at 100.00 AAA 3,511,049
12,000 5.250%, 10/01/19 - MBIA Insured 4/13 at 100.00 AAA 12,709,679
------------------------------------------------------------------------------------------------------------------------------------
38,390 Total Water and Sewer 39,789,175
------------------------------------------------------------------------------------------------------------------------------------
$ 531,685 Total Investments (cost $527,776,728) - 155.6% 534,827,053
=============-----------------------------------------------------------------------------------------------------------------------
Floating Rate Obligations - (2.3)% (7,930,000)
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.1% 3,909,004
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (54.4)% (187,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 343,806,057
====================================================================================================================
FORWARD SWAPS OUTSTANDING AT AUGUST 31, 2007:
FUND FIXED RATE UNREALIZED
NOTIONAL PAY/RECEIVE FLOATING RATE FIXED RATE PAYMENT EFFECTIVE TERMINATION APPRECIATION
COUNTERPARTY AMOUNT FLOATING RATE INDEX (ANNUALIZED) FREQUENCY DATE (5) DATE (DEPRECIATION)
------------------------------------------------------------------------------------------------------------------------------------
UBS $29,000,000 Receive 3-Month USD-LIBOR 5.471% Semi-Annually 6/04/08 6/04/13 $(652,859)
====================================================================================================================================
USD-LIBOR (United States Dollar-London Inter-Bank Offered Rate)
The Fund may invest in "zero coupon" securities. A zero
coupon security does not pay a regular interest coupon to
its holders during the life of the security. Tax-exempt
income to the holder of the security comes from accretion of
the difference between the original purchase price of the
security at issuance and the par value of the security at
maturity and is effectively paid at maturity. Such
securities are included in the Portfolio of Investments with
a 0.000% coupon rate in their description. The market prices
of zero coupon securities generally are more volatile than
the market prices of securities that pay interest
periodically.
(1) All percentages shown in the Portfolio of Investments are
based on net assets applicable to Common shares unless
otherwise noted.
(2) Optional Call Provisions (not covered by the report of
independent registered public accounting firm): Dates (month
and year) and prices of the earliest optional call or
redemption. There may be other call provisions at varying
prices at later dates. Certain mortgage-backed securities
may be subject to periodic principal paydowns.
(3) Ratings (not covered by the report of independent registered
public accounting firm): Using the higher of Standard &
Poor's or Moody's rating. Ratings below BBB by Standard &
Poor's Group or Baa by Moody's Investor Service, Inc. are
considered to be below investment grade.
(4) Backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities which ensure
the timely payment of principal and interest. Such
investments are normally considered to be equivalent to AAA
rated securities.
(5) Effective date represents the date on which both the Fund
and counterparty commence interest payment accruals on each
forward swap contract.
N/R Not rated.
DD Portion of investment purchased on a delayed delivery basis.
(IF) Inverse floating rate investment.
(UB) Underlying bond of an inverse floating rate trust reflected
as a financing transaction pursuant to the provisions of
SFAS No. 140.
See accompanying notes to financial statements.
56
NKL
Nuveen Insured California Dividend Advantage Municipal Fund
Portfolio of INVESTMENTS
August 31, 2007
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 4.1% (2.7% OF TOTAL INVESTMENTS)
$ 14,155 Golden State Tobacco Securitization Corporation, California, 6/22 at 100.00 BBB $ 9,312,858
Enhanced Tobacco Settlement Asset-Backed Bonds,
Series 2007A-2, 0.000%, 6/01/37
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 4.8% (3.1% OF TOTAL INVESTMENTS)
1,675 California Educational Facilities Authority, Revenue Bonds, 10/12 at 100.00 A2 1,703,659
University of San Diego, Series 2002A, 5.250%, 10/01/30
9,000 California State University, Systemwide Revenue Bonds, 11/12 at 100.00 AAA 9,257,400
Series 2002A, 5.125%, 11/01/26 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
10,675 Total Education and Civic Organizations 10,961,059
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 5.7% (3.7% OF TOTAL INVESTMENTS)
5,000 ABAG Finance Authority for Non-Profit Corporations, California, 4/12 at 100.00 A+ 5,176,950
Cal-Mortgage Insured Revenue Bonds, Sansum-Santa Barbara
Medical Foundation Clinic, Series 2002A, 5.600%, 4/01/26
5,000 California Health Facilities Financing Authority, Revenue Bonds, 3/16 at 100.00 A+ 5,008,500
Kaiser Permanante System, Series 2006, 5.250%, 3/01/45
2,815 California Health Facilities Financing Authority, Revenue Bonds, 8/13 at 100.00 AAA 2,900,351
Lucile Salter Packard Children's Hospital, Series 2003C,
5.000%, 8/15/20 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
12,815 Total Health Care 13,085,801
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 1.3% (0.9% OF TOTAL INVESTMENTS)
1,000 California Statewide Community Development Authority, Student 8/12 at 100.00 A 1,011,740
Housing Revenue Bonds, EAH - Irvine East Campus Apartments,
LLC Project, Series 2002A, 5.500%, 8/01/22 - ACA Insured
1,905 Los Angeles, California, GNMA Mortgage-Backed Securities 7/11 at 102.00 AAA 1,940,033
Program Multifamily Housing Revenue Bonds, Park Plaza West
Senior Apartments, Series 2001B, 5.300%, 1/20/21
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
2,905 Total Housing/Multifamily 2,951,773
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 0.3% (0.2% OF TOTAL INVESTMENTS)
550 California Housing Finance Agency, Home Mortgage Revenue 2/16 at 100.00 AAA 575,339
Bonds, Series 2006H, 5.750%, 8/01/30 - FGIC Insured
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 1.3% (0.9% OF TOTAL INVESTMENTS)
3,000 California Pollution Control Financing Authority, Solid Waste No Opt. Call BBB+ 3,061,980
Disposal Revenue Bonds, Republic Services Inc., Series 2002C,
5.250%, 6/01/23 (Mandatory put 12/01/17)
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CARE - 1.3% (0.9% OF TOTAL INVESTMENTS)
3,000 ABAG Finance Authority for Non-Profit Corporations, 11/12 at 100.00 A+ 3,067,350
California, Insured Senior Living Revenue Bonds, Odd Fellows
Home of California, Series 2003A, 5.200%, 11/15/22
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 24.8% (16.1% OF TOTAL INVESTMENTS)
5,920 Cajon Valley Union School District, San Diego County, California, 8/10 at 102.00 AAA 6,013,477
General Obligation Bonds, Series 2002B, 5.125%, 8/01/32 -
MBIA Insured
3,000 California State, General Obligation Bonds, Series 2007, 12/16 at 100.00 AAA 2,666,700
4.250%, 12/01/35 - AMBAC Insured
2,900 California, General Obligation Bonds, Series 2003, 5.000%, 2/01/21 8/13 at 100.00 A+ 2,979,779
8,250 California, General Obligation Refunding Bonds, Series 2002, 2/12 at 100.00 AAA 8,441,483
5.000%, 2/01/22 - MBIA Insured
230 El Monte Union High School District, Los Angeles County, 6/13 at 100.00 AAA 233,889
California, General Obligation Bonds, Series 2003A,
5.000%, 6/01/28 - FSA Insured
57
NKL
Nuveen Insured California Dividend Advantage Municipal Fund (continued)
Portfolio of INVESTMENTS August 31, 2007
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL (continued)
$ 10,000 Fremont Unified School District, Alameda County, California, 8/12 at 101.00 AAA $ 10,241,200
General Obligation Bonds, Series 2002A, 5.000%, 8/01/25 -
FGIC Insured
1,000 Los Rios Community College District, Sacramento, El Dorado 8/14 at 102.00 AAA 1,034,130
and Yolo Counties, California, General Obligation Bonds,
Series 2006C, 5.000%, 8/01/25 - FSA Insured
1,500 Madera Unified School District, Madera County, California, 8/12 at 100.00 AAA 1,522,125
General Obligation Bonds, Series 2002, 5.000%, 8/01/28 -
FSA Insured
2,000 Murrieta Valley Unified School District, Riverside County, 9/17 at 100.00 AAA 1,910,280
California, General Obligation Bonds, Series 2007,
4.500%, 9/01/30 - FSA Insured
2,500 Oakland Unified School District, Alameda County, California, 8/12 at 100.00 AAA 2,642,150
General Obligation Bonds, Series 2002, 5.250%, 8/01/21 -
FGIC Insured
375 Roseville Joint Union High School District, Placer County, 8/15 at 100.00 AAA 386,726
California, General Obligation Bonds, Series 2006B,
5.000%, 8/01/27 - FGIC Insured
3,250 San Diego Unified School District, San Diego County, California, 7/11 at 102.00 AAA 3,446,950
General Obligation Bonds, Election of 1998, Series 2001C,
5.000%, 7/01/22 - FSA Insured
1,160 San Gabriel Unified School District, Los Angeles County, 8/15 at 100.00 AAA 1,204,486
California, General Obligation Bonds, Series 2005,
5.000%, 8/01/22 - FSA Insured
3,500 San Mateo County Community College District, California, 9/12 at 100.00 AAA 3,565,030
General Obligation Bonds, Series 2002A, 5.000%, 9/01/26 -
FGIC Insured
10,000 Vista Unified School District, San Diego County, California, 8/12 at 100.00 AAA 10,235,700
General Obligation Bonds, Series 2002A, 5.000%, 8/01/23 -
FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
55,585 Total Tax Obligation/General 56,524,105
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 49.5% (32.2% OF TOTAL INVESTMENTS)
1,450 Baldwin Park Public Financing Authority, California, Sales Tax 8/13 at 102.00 BBB 1,504,999
and Tax Allocation Bonds, Puente Merced Redevelopment
Project, Series 2003, 5.250%, 8/01/21
6,895 Brea and Olinda Unified School District, Orange County, 8/11 at 101.00 AAA 7,040,209
California, Certificates of Participation Refunding, Series 2002A,
5.125%, 8/01/26 - FSA Insured
1,320 Burbank Public Financing Authority, California, Revenue 12/13 at 100.00 AAA 1,403,239
Refunding Bonds, Golden State Redevelopment Project,
Series 2003A, 5.250%, 12/01/19 - AMBAC Insured (5)
2,200 California Infrastructure Economic Development Bank, 9/13 at 101.00 AAA 2,251,502
Los Angeles County, Revenue Bonds, Department of Public
Social Services, Series 2003, 5.000%, 9/01/28 - AMBAC Insured
3,100 California State Public Works Board, Lease Revenue Bonds, 11/15 at 100.00 AAA 3,150,716
Department of Health Services, Richmond Lab, Series 2005B,
5.000%, 11/01/30 - XLCA Insured
465 Capistrano Unified School District, Orange County, California, 9/15 at 100.00 AAA 479,689
Special Tax Bonds, Community Facilities District, Series 2005,
5.000%, 9/01/24 - FGIC Insured
1,400 Chino Redevelopment Agency, California, Merged Chino 9/16 at 101.00 AAA 1,439,396
Redevelopment Project Area Tax Allocation Bonds, Series 2006,
5.000%, 9/01/38 - AMBAC Insured
7,035 Corona-Norco Unified School District, Riverside County, 9/13 at 100.00 AAA 7,179,218
California, Special Tax Bonds, Community Facilities District 98-1,
Series 2003, 5.000%, 9/01/28 - MBIA Insured
3,145 Culver City Redevelopment Agency, California, Tax Allocation 5/11 at 101.00 AAA 3,220,071
Revenue Bonds, Redevelopment Project, Series 2002A,
5.125%, 11/01/25 - MBIA Insured
8,720 El Monte, California, Senior Lien Certificates of Participation, 1/11 at 100.00 AAA 8,846,266
Department of Public Services Facility Phase II, Series 2001,
5.000%, 1/01/21 - AMBAC Insured
4,000 Folsom Public Financing Authority, California, Special Tax Revenue 9/12 at 102.00 AAA 4,112,920
Bonds, Series 2004A, 5.000%, 9/01/21 - AMBAC Insured
4,985 Golden State Tobacco Securitization Corporation, California 6/15 at 100.00 AAA 5,519,641
Enhanced Tobacco Settlement Revenue Bonds, Drivers
Trust 2091, 7.092%, 6/01/45 - AGC Insured (IF)
1,300 Hesperia Public Financing Authority, California, Redevelopment 9/17 at 100.00 Aaa 1,280,110
and Housing Projects Tax Allocation Bonds, Series 2007A,
5.000%, 9/01/37 (WI/DD, Settling 9/12/07) - XLCA Insured
2,115 Inglewood Redevelopment Agency, California, Tax Allocation No Opt. Call AAA 2,307,550
Refunding Bonds, Merged Area Redevelopment Project,
Series 1998A, 5.250%, 5/01/23 - AMBAC Insured
58
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED (continued)
$ 3,500 La Quinta Redevelopment Agency, California, Tax Allocation Bonds, 9/11 at 102.00 AAA $ 3,580,710
Redevelopment Project Area 1, Series 2001, 5.100%, 9/01/31 -
AMBAC Insured
3,400 La Quinta Redevelopment Agency, California, Tax Allocation Bonds, 9/12 at 102.00 AAA 3,513,492
Redevelopment Project Area 1, Series 2002, 5.000%, 9/01/22 -
AMBAC Insured
845 Los Angeles Community Redevelopment Agency, California, 9/15 at 100.00 Aaa 850,256
Lease Revenue Bonds, Manchester Social Services Project,
Series 2005, 5.000%, 9/01/37 - AMBAC Insured
4,690 Los Angeles County Metropolitan Transportation Authority, 7/08 at 101.00 AAA 4,758,099
California, Proposition C Second Senior Lien Sales Tax Revenue
Refunding Bonds, Series 1998A, 5.000%, 7/01/23 -
AMBAC Insured
1,460 Los Angeles, California, Certificates of Participation, Municipal 6/13 at 100.00 AAA 1,475,505
Improvement Corporation, Series 2003AW, 5.000%, 6/01/33 -
AMBAC Insured
7,000 Los Angeles, California, Certificates of Participation, Series 2002, 4/12 at 100.00 AAA 7,187,810
5.200%, 4/01/27 - AMBAC Insured
4,500 Los Angeles, California, Municipal Improvement Corporation, 1/17 at 100.00 AAA 4,647,150
Lease Revenue Bonds, Police Headquarters, Series 2006A,
5.000%, 1/01/25 - FGIC Insured
8,470 Ontario Redevelopment Financing Authority, California, 8/11 at 101.00 AAA 8,713,428
Lease Revenue Bonds, Capital Projects, Series 2001,
5.200%, 8/01/29 - AMBAC Insured
5,000 Palm Desert Financing Authority, California, Tax Allocation 4/12 at 102.00 AAA 5,126,550
Revenue Refunding Bonds, Project Area 1, Series 2002,
5.000%, 4/01/25 - MBIA Insured
3,000 Puerto Rico Highway and Transportation Authority, Highway No Opt. Call AAA 3,273,480
Revenue Bonds, Series 2007N, 5.250%, 7/01/39 - FGIC Insured
405 Rialto Redevelopment Agency, California, Tax Allocation Bonds, 9/15 at 100.00 AAA 410,196
Merged Project Area, Series 2005A, 5.000%, 9/01/35 -
XLCA Insured
4,475 Riverside County, California, Asset Leasing Corporate Leasehold 6/12 at 101.00 AAA 4,634,981
Revenue Bonds, Riverside County Hospital Project,
Series 1997B, 5.000%, 6/01/19 - MBIA Insured
505 Roseville, California, Certificates of Participation, Public 8/13 at 100.00 AAA 513,378
Facilities, Series 2003A, 5.000%, 8/01/25 - AMBAC Insured
3,175 San Buenaventura, California, Certificates of Participation, 2/11 at 101.00 AAA 3,254,978
Series 2001C, 5.250%, 2/01/31 - AMBAC Insured
3,730 San Diego Redevelopment Agency, California, Subordinate Lien 9/09 at 101.00 Baa2 3,770,172
Tax Increment and Parking Revenue Bonds, Centre City Project,
Series 2003B, 5.250%, 9/01/26
4,000 San Jose Financing Authority, California, Lease Revenue 9/11 at 100.00 AAA 4,150,240
Refunding Bonds, Convention Center Project, Series 2001F,
5.000%, 9/01/19 - MBIA Insured
1,000 Shasta Joint Powers Financing Authority, California, Lease 4/13 at 100.00 AAA 1,037,880
Revenue Bonds, County Administration Building Project,
Series 2003A, 5.250%, 4/01/23 - MBIA Insured
2,160 Temecula Redevelopment Agency, California, Tax Allocation 8/08 at 102.00 AAA 2,192,119
Revenue Bonds, Redevelopment Project 1, Series 2002,
5.125%, 8/01/27 - MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
109,445 Total Tax Obligation/Limited 112,825,950
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 5.1% (3.3% OF TOTAL INVESTMENTS)
7,500 Foothill/Eastern Transportation Corridor Agency, California, 1/14 at 101.00 BBB- 6,965,175
Toll Road Revenue Refunding Bonds, Series 1999,
0.000%, 1/15/29
San Francisco Airports Commission, California, Revenue Bonds,
San Francisco International Airport, Second Series 2003, Issue 29A:
2,185 5.250%, 5/01/16 - FGIC Insured (Alternative Minimum Tax) 5/13 at 100.00 AAA 2,292,415
2,300 5.250%, 5/01/17 - FGIC Insured (Alternative Minimum Tax) 5/13 at 100.00 AAA 2,403,661
------------------------------------------------------------------------------------------------------------------------------------
11,985 Total Transportation 11,661,251
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 23.3% (15.1% OF TOTAL INVESTMENTS) (4)
6,000 California Department of Water Resources, Power Supply 5/12 at 101.00 Aaa 6,437,100
Revenue Bonds, Series 2002A, 5.125%, 5/01/18
(Pre-refunded 5/01/12)
California Health Facilities Financing Authority, Revenue Bonds,
Cedars-Sinai Medical Center, Series 1999A:
2,500 6.125%, 12/01/30 (Pre-refunded 12/01/09) 12/09 at 101.00 N/R (4) 2,659,000
1,000 6.250%, 12/01/34 (Pre-refunded 12/01/09) 12/09 at 101.00 N/R (4) 1,066,280
59
NKL
Nuveen Insured California Dividend Advantage Municipal Fund (continued)
Portfolio of INVESTMENTS August 31, 2007
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED (4) (continued)
$ 2,250 California Infrastructure Economic Development Bank, 1/28 at 100.00 AAA $ 2,403,383
First Lien Revenue Bonds, San Francisco Bay Area Toll Bridge,
Series 2003A, 5.000%, 7/01/36 (Pre-refunded 1/01/28) -
AMBAC Insured
1,000 California, General Obligation Bonds, Series 2004, 2/14 at 100.00 A+ (4) 1,076,850
5.125%, 2/01/27 (Pre-refunded 2/01/14)
6,100 East Bay Municipal Utility District, Alameda and Contra 6/11 at 100.00 AAA 6,402,865
Costa Counties, California, Water System Subordinated
Revenue Bonds, Series 2001, 5.000%, 6/01/26 (Pre-refunded
6/01/11) - MBIA Insured
2,185 El Monte Union High School District, Los Angeles County, 6/13 at 100.00 Aaa 2,330,434
California, General Obligation Bonds, Series 2003A,
5.000%, 6/01/28 (Pre-refunded 6/01/13) - FSA Insured
Fresno Unified School District, Fresno County, California,
General Obligation Bonds, Series 2002B:
1,135 5.125%, 8/01/23 - FGIC Insured (ETM) 8/10 at 102.00 AAA 1,181,830
1,190 5.125%, 8/01/24 - FGIC Insured (ETM) 8/10 at 102.00 AAA 1,234,066
1,245 5.125%, 8/01/25 - FGIC Insured (ETM) 8/10 at 102.00 AAA 1,292,833
1,255 5.125%, 8/01/26 - FGIC Insured (ETM) 8/10 at 102.00 AAA 1,304,798
2,070 Fresno Unified School District, Fresno County, California, 8/10 at 102.00 AAA 2,152,138
General Obligation Bonds, Series 2002G, 5.125%, 8/01/26 -
FSA Insured (ETM)
4,500 Golden State Tobacco Securitization Corporation, California, 6/13 at 100.00 AAA 5,420,025
Tobacco Settlement Asset-Backed Revenue Bonds,
Series 2003A-2, 7.900%, 6/01/42 (Pre-refunded 6/01/13)
5,000 Los Angeles Unified School District, California, General 7/12 at 100.00 AAA 5,340,950
Obligation Bonds, Series 2002E, 5.125%, 1/01/27
(Pre-refunded 7/01/12) - MBIA Insured
3,000 Peralta Community College District, Alameda County, 8/09 at 102.00 AAA 3,136,200
California, General Obligation Bonds, Election of 2000,
Series 2001A, 5.000%, 8/01/31 (Pre-refunded 8/01/09) -
FGIC Insured
3,380 Rancho Mirage Joint Powers Financing Authority, California, 7/14 at 100.00 A3 (4) 3,793,002
Revenue Bonds, Eisenhower Medical Center, Series 2004,
5.875%, 7/01/26 (Pre-refunded 7/01/14)
2,980 Santa Clarita Community College District, Los Angeles County, 8/11 at 101.00 AAA 3,173,611
California, General Obligation Bonds, Series 2002,
5.125%, 8/01/26 (Pre-refunded 8/01/11) - FGIC Insured
2,460 Vacaville Unified School District, Solano County, California, 8/11 at 101.00 AAA 2,608,682
General Obligation Bonds, Series 2002, 5.000%, 8/01/26
(Pre-refunded 8/01/11) - FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
49,250 Total U.S. Guaranteed 53,014,047
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 16.9% (11.0% OF TOTAL INVESTMENTS)
9,000 Anaheim Public Finance Authority, California, Revenue 10/12 at 100.00 AAA 9,157,140
Bonds, Electric System Distribution Facilities, Series 2002A,
5.000%, 10/01/27 - FSA Insured
10,000 California Pollution Control Financing Authority, Remarketed 4/11 at 102.00 AAA 10,508,300
Revenue Bonds, Pacific Gas and Electric Company,
Series 1996A, 5.350%, 12/01/16 - MBIA Insured
(Alternative Minimum Tax)
3,000 Los Angeles Department of Water and Power, California, 7/11 at 100.00 AAA 3,118,890
Power System Revenue Bonds, Series 2001A-1,
5.250%, 7/01/21 - FSA Insured
830 Merced Irrigation District, California, Electric System 9/15 at 100.00 AAA 850,235
Revenue Bonds, Series 2005, 5.125%, 9/01/31 -
XLCA Insured
6,000 Northern California Power Agency, Revenue Refunding 7/08 at 101.00 AAA 6,113,640
Bonds, Hydroelectric Project 1, Series 1998A,
5.200%, 7/01/32 - MBIA Insured
3,000 Sacramento Municipal Utility District, California, Electric 8/11 at 100.00 AAA 3,036,390
Revenue Bonds, Series 2001N, 5.000%, 8/15/28 -
MBIA Insured
5,630 Southern California Public Power Authority, Subordinate 7/12 at 100.00 AAA 5,726,892
Revenue Refunding Bonds, Transmission Project,
Series 2002A, 4.750%, 7/01/19 - FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
37,460 Total Utilities 38,511,487
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 15.2% (9.9% OF TOTAL INVESTMENTS)
3,000 California Department of Water Resources, Water System 12/12 at 100.00 AAA 3,104,400
Revenue Bonds, Central Valley Project, Series 2002X,
5.150%, 12/01/23 - FGIC Insured
9,000 Eastern Municipal Water District, California, Water and 7/11 at 100.00 AAA 9,075,870
Sewerage System Revenue Certificates of Participation,
Series 2001B, 5.000%, 7/01/30 - FGIC Insured
60
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER (continued)
$ 750 Fortuna Public Finance Authority, California, Water Revenue 10/16 at 100.00 AAA $ 771,756
Bonds, Series 2006, 5.000%, 10/01/36 - FSA Insured
570 Healdsburg Public Financing Authority, California, Wastewater 4/16 at 100.00 AAA 582,141
Revenue Bonds, Series 2006, 5.000%, 4/01/36 - MBIA Insured
4,500 Los Angeles County Sanitation Districts Financing Authority, 10/13 at 100.00 AAA 4,628,070
California, Senior Revenue Bonds, Capital Projects,
Series 2003A, 5.000%, 10/01/23 - FSA Insured
2,855 Manteca Financing Authority, California, Sewerage Revenue 12/13 at 100.00 Aaa 2,858,426
Bonds, Series 2003B, 5.000%, 12/01/33 - MBIA Insured
500 Marina Coast Water District, California, Enterprise Certificate 6/16 at 100.00 AAA 507,935
of Participation, Series 2006, 5.000%, 6/01/31 - MBIA Insured
9,185 Orange County Sanitation District, California, Certificates 8/13 at 100.00 AAA 9,285,300
of Participation, Series 2003, 5.000%, 2/01/33 - FGIC Insured
870 Sacramento County Sanitation District Financing Authority, 6/16 at 100.00 AAA 895,726
California, Revenue Bonds, Series 2006, 5.000%, 12/01/36 -
FGIC Insured
Semitropic Water Storage District, Kern County, California,
Water Banking Revenue Bonds, Series 2004A:
1,315 5.500%, 12/01/20 - XLCA Insured 12/14 at 100.00 AAA 1,413,572
1,415 5.500%, 12/01/21 - XLCA Insured 12/14 at 100.00 AAA 1,514,701
------------------------------------------------------------------------------------------------------------------------------------
33,960 Total Water and Sewer 34,637,897
------------------------------------------------------------------------------------------------------------------------------------
$ 344,785 Total Investments (cost $337,767,689) - 153.6% 350,190,897
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (1.8)% (4,267,455)
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (51.8)% (118,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 227,923,442
====================================================================================================================
61
NKL
Nuveen Insured California Dividend Advantage Municipal Fund (continued)
Portfolio of INVESTMENTS August 31, 2007
FORWARD SWAPS OUTSTANDING AT AUGUST 31, 2007:
FUND FIXED RATE UNREALIZED
NOTIONAL PAY/RECEIVE FLOATING RATE FIXED RATE PAYMENT EFFECTIVE TERMINATION APPRECIATION
COUNTERPARTY AMOUNT FLOATING RATE INDEX (ANNUALIZED) FREQUENCY DATE (6) DATE (DEPRECIATION)
------------------------------------------------------------------------------------------------------------------------------------
Goldman
Sachs $4,000,000 Pay 3-Month USD-LIBOR 5.215% Semi-Annually 3/12/08 3/12/30 $(111,251)
JPMorgan 5,000,000 Pay SIFM 4.376 Quarterly 8/06/08 8/06/37 135,670
------------------------------------------------------------------------------------------------------------------------------------
$ 24,419
====================================================================================================================================
USD-LIBOR (United States Dollar-London Inter-Bank Offered Rate)
SIFM - The daily arithmetic average of the weekly SIFM (the Securities Industry
and Financial Markets) Municipal Swap Index.
The Fund may invest in "zero coupon" securities. A zero
coupon security does not pay a regular interest coupon to
its holders during the life of the security. Tax-exempt
income to the holder of the security comes from accretion of
the difference between the original purchase price of the
security at issuance and the par value of the security at
maturity and is effectively paid at maturity. Such
securities are included in the Portfolio of Investments with
a 0.000% coupon rate in their description. The market prices
of zero coupon securities generally are more volatile than
the market prices of securities that pay interest
periodically.
At least 80% of the Fund's net assets (including net assets
attributable to Preferred shares) are invested in municipal
securities that are either covered by Original Issue
Insurance, Secondary Market Insurance or Portfolio Insurance
which ensures the timely payment of principal and interest.
Up to 20% of the Fund's net assets (including net assets
attributable to Preferred shares) may be invested in
municipal securities that are (i) either backed by an escrow
or trust containing sufficient U.S. Government or U.S.
Government agency securities (also ensuring the timely
payment of principal and interest), or (ii) rated, at the
time of investment, within the four highest grades (Baa or
BBB or better by Moody's, S&P or Fitch) or unrated but
judged to be of comparable quality by the Adviser.
(1) All percentages shown in the Portfolio of Investments are
based on net assets applicable to Common shares unless
otherwise noted.
(2) Optional Call Provisions (not covered by the report of
independent registered public accounting firm): Dates (month
and year) and prices of the earliest optional call or
redemption. There may be other call provisions at varying
prices at later dates. Certain mortgage-backed securities
may be subject to periodic principal paydowns.
(3) Ratings (not covered by the report of independent registered
public accounting firm): Using the higher of Standard &
Poor's or Moody's rating. Ratings below BBB by Standard &
Poor's Group or Baa by Moody's Investor Service, Inc. are
considered to be below investment grade.
(4) Backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities which ensure
the timely payment of principal and interest. Such
investments are normally considered to be equivalent to AAA
rated securities.
(5) Portion of investment, with an aggregate market value of
$584,683, has been pledged to collateralize the net payment
obligations under forward swap contracts.
(6) Effective date represents the date on which both the Fund
and counterparty commence interest payment accruals on each
forward swap contract.
N/R Not rated.
WI/DD Purchased on a when-issued or delayed delivery basis.
(ETM) Escrowed to maturity.
(IF) Inverse floating rate investment.
See accompanying notes to financial statements.
62
NKX
Nuveen Insured California Tax-Free Advantage Municipal Fund
Portfolio of INVESTMENTS
August 31, 2007
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 4.7% (3.0% OF TOTAL INVESTMENTS)
$ 6,070 Golden State Tobacco Securitization Corporation, California, 6/22 at 100.00 BBB $ 3,993,574
Enhanced Tobacco Settlement Asset-Backed Bonds,
Series 2007A-2, 0.000%, 6/01/37
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 11.8% (7.6% OF TOTAL INVESTMENTS)
1,815 California Health Facilities Financing Authority, Revenue 3/16 at 100.00 A+ 1,818,086
Bonds, Kaiser Permanante System, Series 2006,
5.250%, 3/01/45
1,800 California Infrastructure Economic Development Bank, 8/11 at 102.00 A+ 1,842,030
Revenue Bonds, Kaiser Hospital Assistance LLC,
Series 2001A, 5.550%, 8/01/31
2,000 California Statewide Community Development Authority, 6/13 at 100.00 AAA 2,093,780
Hospital Revenue Bonds, Monterey Peninsula Hospital,
Series 2003B, 5.250%, 6/01/23 - FSA Insured
4,060 California Statewide Community Development Authority, No Opt. Call AAA 4,275,951
Revenue Bonds, Sherman Oaks Health System, Series 1998A,
5.000%, 8/01/22 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
9,675 Total Health Care 10,029,847
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 1.3% (0.9% OF TOTAL INVESTMENTS)
1,165 Poway, California, Housing Revenue Bonds, Revenue Bonds, 5/13 at 102.00 A+ 1,148,748
Poinsettia Mobile Home Park, Series 2003, 5.000%, 5/01/23
------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CARE - 3.6% (2.3% OF TOTAL INVESTMENTS)
1,000 ABAG Finance Authority for Non-Profit Corporations, California, 11/12 at 100.00 A+ 1,022,450
Insured Senior Living Revenue Bonds, Odd Fellows Home of
California, Series 2003A, 5.200%, 11/15/22
2,000 California Health Facilities Financing Authority, Cal-Mortgage 1/13 at 100.00 A+ 2,035,660
Insured Revenue Bonds, Northern California Retired Officers
Community Corporation - Paradise Valley Estates, Series 2002,
5.250%, 1/01/26
------------------------------------------------------------------------------------------------------------------------------------
3,000 Total Long-Term Care 3,058,110
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 28.0% (18.0% OF TOTAL INVESTMENTS)
2,000 Butte-Glenn Community College District, Butte and Glenn 8/12 at 101.00 Aaa 2,043,020
Counties, California, General Obligation Bonds, Series 2002A,
5.000%, 8/01/26 - MBIA Insured
California State, General Obligation Bonds, Series 2002:
2,460 5.000%, 4/01/27 - AMBAC Insured 4/12 at 100.00 AAA 2,499,139
55 5.250%, 4/01/30 - XLCA Insured 4/12 at 100.00 AAA 56,891
1,000 California State, General Obligation Bonds, Series 2007, 12/16 at 100.00 AAA 888,900
4.250%, 12/01/35 - AMBAC Insured
450 Fremont Unified School District, Alameda County, California, 8/12 at 101.00 AAA 460,854
General Obligation Bonds, Series 2002A, 5.000%, 8/01/25 -
FGIC Insured
Hacienda La Puente Unified School District, Los Angeles County,
California, General Obligation Bonds, Series 2003B:
4,500 5.000%, 8/01/26 - FSA Insured 8/13 at 100.00 AAA 4,596,795
2,030 5.000%, 8/01/27 - FSA Insured 8/13 at 100.00 AAA 2,070,519
2,000 Los Angeles, California, General Obligation Bonds, Series 2002A, 9/12 at 100.00 AAA 2,051,540
5.000%, 9/01/22 - MBIA Insured
1,000 Murrieta Valley Unified School District, Riverside County, 9/13 at 100.00 AAA 1,021,820
California, General Obligation Bonds, Series 2003A,
5.000%, 9/01/26 - FGIC Insured
1,000 Murrieta Valley Unified School District, Riverside County, 9/17 at 100.00 AAA 955,140
California, General Obligation Bonds, Series 2007,
4.500%, 9/01/30 - FSA Insured
63
NKX
Nuveen Insured California Tax-Free Advantage Municipal Fund (continued)
Portfolio of INVESTMENTS August 31, 2007
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL (continued)
$ 140 Roseville Joint Union High School District, Placer County, 8/15 at 100.00 AAA $ 144,378
California, General Obligation Bonds, Series 2006B,
5.000%, 8/01/27 - FGIC Insured
3,000 San Diego Unified School District, California, General 7/10 at 100.00 AAA 3,109,350
Obligation Bonds, Election of 1998, Series 2000B,
5.125%, 7/01/22 - MBIA Insured
3,855 San Rafael City High School District, Marin County, 8/12 at 100.00 AAA 3,911,861
California, General Obligation Bonds, Series 2003A,
5.000%, 8/01/28 - FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
23,490 Total Tax Obligation/General 23,810,207
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 46.4% (29.9% OF TOTAL INVESTMENTS)
550 Baldwin Park Public Financing Authority, California, Sales 8/13 at 102.00 BBB 570,862
Tax and Tax Allocation Bonds, Puente Merced Redevelopment
Project, Series 2003, 5.250%, 8/01/21
1,165 Burbank Public Financing Authority, California, Revenue 12/13 at 100.00 AAA 1,221,176
Refunding Bonds, Golden State Redevelopment Project,
Series 2003A, 5.250%, 12/01/22 - AMBAC Insured
2,000 California State Public Works Board, Lease Revenue Bonds, 12/13 at 100.00 A 2,155,500
Department of Corrections, Series 2003C, 5.500%, 6/01/16
4,000 California State Public Works Board, Lease Revenue Bonds, 12/12 at 100.00 AAA 4,071,720
Department of General Services, Capital East End Project,
Series 2002A, 5.000%, 12/01/27 - AMBAC Insured
170 Capistrano Unified School District, Orange County, California, 9/15 at 100.00 AAA 175,370
Special Tax Bonds, Community Facilities District, Series 2005,
5.000%, 9/01/24 - FGIC Insured
525 Chino Redevelopment Agency, California, Merged Chino 9/16 at 101.00 AAA 539,774
Redevelopment Project Area Tax Allocation Bonds,
Series 2006, 5.000%, 9/01/38 - AMBAC Insured
1,610 Folsom Public Financing Authority, California, Special Tax 9/12 at 102.00 AAA 1,655,450
Revenue Bonds, Series 2004A, 5.000%, 9/01/21 -
AMBAC Insured
1,875 Golden State Tobacco Securitization Corporation, California 6/15 at 100.00 AAA 2,076,094
Enhanced Tobacco Settlement Revenue Bonds, Drivers
Trust 2091, 7.092%, 6/01/45 - AGC Insured (IF)
1,000 Hesperia Public Financing Authority, California, Redevelopment 9/17 at 100.00 Aaa 984,700
and Housing Projects Tax Allocation Bonds, Series 2007A,
5.000%, 9/01/37 (WI/DD, Settling 9/12/07) - XLCA Insured
5,540 Irvine Public Facilities and Infrastructure Authority, California, 9/13 at 100.00 AAA 5,701,934
Assessment Revenue Bonds, Series 2003C,
5.000%, 9/02/21 - AMBAC Insured
315 Los Angeles Community Redevelopment Agency, California, 9/15 at 100.00 Aaa 316,959
Lease Revenue Bonds, Manchester Social Services Project,
Series 2005, 5.000%, 9/01/37 - AMBAC Insured
1,770 Los Angeles Unified School District, California, Certificates 10/12 at 100.00 AAA 1,797,683
of Participation, Administration Building Project II,
Series 2002C, 5.000%, 10/01/27 - AMBAC Insured
2,000 Los Angeles, California, Certificates of Participation, 6/13 at 100.00 AAA 2,021,240
Municipal Improvement Corporation, Series 2003AW,
5.000%, 6/01/33 - AMBAC Insured
Los Angeles, California, Municipal Improvement Corporation,
Lease Revenue Bonds, Police Headquarters, Series 2006A:
1,500 4.750%, 1/01/31 - FGIC Insured 1/17 at 100.00 AAA 1,471,890
1,500 4.500%, 1/01/37 - FGIC Insured 1/17 at 100.00 AAA 1,388,400
1,500 Los Osos, California, Improvement Bonds, Community 9/10 at 103.00 AAA 1,524,135
Services Wastewater Assessment District 1, Series 2002,
5.000%, 9/02/33 - MBIA Insured
1,000 Puerto Rico Highway and Transportation Authority, Highway No Opt. Call AAA 1,091,160
Revenue Bonds, Series 2007N, 5.250%, 7/01/39 - FGIC Insured
150 Rialto Redevelopment Agency, California, Tax Allocation 9/15 at 100.00 AAA 151,925
Bonds, Merged Project Area, Series 2005A, 5.000%, 9/01/35 -
XLCA Insured
190 Roseville, California, Certificates of Participation, 8/13 at 100.00 AAA 193,152
Public Facilities, Series 2003A, 5.000%, 8/01/25 -
AMBAC Insured
64
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED (continued)
San Buenaventura, California, Certificates of Participation,
Golf Course Financing Project, Series 2002D:
$ 3,000 5.000%, 2/01/27 - AMBAC Insured 2/12 at 100.00 AAA $ 3,041,370
3,300 5.000%, 2/01/32 - AMBAC Insured 2/12 at 100.00 AAA 3,328,974
1,200 San Diego Redevelopment Agency, California, Subordinate 9/09 at 101.00 Baa2 1,212,924
Lien Tax Increment and Parking Revenue Bonds, Centre City
Project, Series 2003B, 5.250%, 9/01/26
2,770 San Jose Financing Authority, California, Lease Revenue 6/12 at 100.00 AAA 2,809,639
Refunding Bonds, Civic Center Project, Series 2002B,
5.000%, 6/01/32 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
38,630 Total Tax Obligation/Limited 39,502,031
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 10.3% (6.6% OF TOTAL INVESTMENTS)
5,480 Bay Area Governments Association, California, 8/12 at 100.00 AAA 5,580,065
BART SFO Extension, Airport Premium Fare Revenue
Bonds, Series 2002A, 5.000%, 8/01/26 - AMBAC Insured
2,000 Foothill/Eastern Transportation Corridor Agency, California, 1/10 at 100.00 BBB- 1,889,240
Toll Road Revenue Bonds, Series 1995A, 5.000%, 1/01/35
1,300 San Francisco Airports Commission, California, Revenue 5/10 at 101.00 AAA 1,325,363
Bonds, San Francisco International Airport, Second
Series 2000, Issue 26B, 5.000%, 5/01/25 - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
8,780 Total Transportation 8,794,668
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 29.4% (18.9% OF TOTAL INVESTMENTS) (4)
1,000 Berryessa Union School District, Santa Clara County, 8/12 at 100.00 AAA 1,063,700
California, General Obligation Bonds, Series 2003C,
5.000%, 8/01/21 (Pre-refunded 8/01/12) - FSA Insured
1,500 California Health Facilities Financing Authority, 11/08 at 101.00 AAA 1,539,300
Revenue Bonds, UCSF - Stanford Healthcare, Series 1998A,
5.000%, 11/15/31 (Pre-refunded 11/15/08) - FSA Insured
California State, General Obligation Bonds, Series 2002:
1,290 5.000%, 4/01/27 (Pre-refunded 4/01/12) - AMBAC Insured 4/12 at 100.00 Aaa 1,367,323
2,945 5.250%, 4/01/30 (Pre-refunded 4/01/12) - XLCA Insured 4/12 at 100.00 Aaa 3,152,387
California, General Obligation Bonds, Series 2004:
1,000 5.125%, 2/01/27 (Pre-refunded 2/01/14) 2/14 at 100.00 A+ (4) 1,076,850
500 5.250%, 4/01/34 (Pre-refunded 4/01/14) 4/14 at 100.00 A1 (4) 542,920
1,625 Golden State Tobacco Securitization Corporation, California, 6/13 at 100.00 AAA 1,957,231
Tobacco Settlement Asset-Backed Revenue Bonds,
Series 2003A-2, 7.900%, 6/01/42 (Pre-refunded 6/01/13)
8,500 Los Angeles Unified School District, California, General 7/13 at 100.00 AAA 9,072,305
Obligation Bonds, Series 2003A, 5.000%, 7/01/22
(Pre-refunded 7/01/13) - FSA Insured
1,260 Rancho Mirage Joint Powers Financing Authority, California, 7/14 at 100.00 A3 (4) 1,413,959
Revenue Bonds, Eisenhower Medical Center, Series 2004,
5.875%, 7/01/26 (Pre-refunded 7/01/14)
1,220 San Jose Redevelopment Agency, California, Tax Allocation 8/10 at 101.00 AAA 1,279,646
Bonds, Merged Area Redevelopment Project, Series 2002,
5.000%, 8/01/32 (Pre-refunded 8/01/10) - MBIA Insured
2,390 Solano County, California, Certificates of Participation, 11/12 at 100.00 AAA 2,577,209
Series 2002, 5.250%, 11/01/24 (Pre-refunded 11/01/12) -
MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
23,230 Total U.S. Guaranteed 25,042,830
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 5.7% (3.7% OF TOTAL INVESTMENTS)
1,000 Anaheim Public Finance Authority, California, Second Lien 10/14 at 100.00 AAA 1,054,630
Electric Distribution Revenue Bonds, Series 2004,
5.250%, 10/01/21 - MBIA Insured
3,055 Los Angeles Department of Water and Power, California, 7/11 at 100.00 AAA 3,176,070
Power System Revenue Bonds, Series 2001A-1,
5.250%, 7/01/22 - FSA Insured
275 Los Angeles Department of Water and Power, California, 7/13 at 100.00 AAA 285,082
Power System Revenue Bonds, Series 2003A-2,
5.000%, 7/01/21 - MBIA Insured
65
NKX
Nuveen Insured California Tax-Free Advantage Municipal Fund (continued)
Portfolio of INVESTMENTS August 31, 2007
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES (continued)
$ 310 Merced Irrigation District, California, Electric System Revenue 9/15 at 100.00 AAA $ 317,558
Bonds, Series 2005, 5.125%, 9/01/31 - XLCA Insured
------------------------------------------------------------------------------------------------------------------------------------
4,640 Total Utilities 4,833,340
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 14.2% (9.1% OF TOTAL INVESTMENTS)
1,000 Castaic Lake Water Agency, California, Revenue Certificates 8/16 at 100.00 AAA 1,013,237
of Participation, Series 2006C, 5.000%, 8/01/36 - MBIA Insured
750 Fortuna Public Finance Authority, California, Water Revenue 10/16 at 100.00 AAA 771,758
Bonds, Series 2006, 5.000%, 10/01/36 - FSA Insured
215 Healdsburg Public Financing Authority, California, Wastewater 4/16 at 100.00 AAA 219,580
Revenue Bonds, Series 2006, 5.000%, 4/01/36 - MBIA Insured
1,055 Manteca Financing Authority, California, Sewerage Revenue 12/13 at 100.00 Aaa 1,056,266
Bonds, Series 2003B, 5.000%, 12/01/33 - MBIA Insured
170 Marina Coast Water District, California, Enterprise Certificate 6/16 at 100.00 AAA 172,698
of Participation, Series 2006, 5.000%, 6/01/31 - MBIA Insured
370 Sacramento County Sanitation District Financing Authority, 6/16 at 100.00 AAA 380,941
California, Revenue Bonds, Series 2006, 5.000%, 12/01/36 -
FGIC Insured
San Diego Public Facilities Financing Authority, California,
Subordinate Lien Water Revenue Bonds, Series 2002:
3,000 5.000%, 8/01/22 - MBIA Insured 8/12 at 100.00 AAA 3,076,020
2,500 5.000%, 8/01/23 - MBIA Insured 8/12 at 100.00 AAA 2,558,925
1,180 South Feather Water and Power Agency, California, Water 4/13 at 100.00 BBB 1,202,998
Revenue Certificates of Participation, Solar Photovoltaic
Project, Series 2003, 5.375%, 4/01/24
1,600 Sunnyvale Financing Authority, California, Water and Wastewater 10/11 at 100.00 AAA 1,624,704
Revenue Bonds, Series 2001, 5.000%, 10/01/26 -
AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
11,840 Total Water and Sewer 12,077,127
------------------------------------------------------------------------------------------------------------------------------------
$ 130,520 Total Investments (cost $129,322,546) - 155.4% 132,290,482
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (2.5)% (2,146,819)
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (52.9)% (45,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 85,143,663
====================================================================================================================
66
FORWARD SWAPS OUTSTANDING AT AUGUST 31, 2007:
FUND FIXED RATE UNREALIZED
NOTIONAL PAY/RECEIVE FLOATING RATE FIXED RATE PAYMENT EFFECTIVE TERMINATION APPRECIATION
COUNTERPARTY AMOUNT FLOATING RATE INDEX (ANNUALIZED) FREQUENCY DATE (5) DATE (DEPRECIATION)
------------------------------------------------------------------------------------------------------------------------------------
Goldman
Sachs $1,000,000 Pay 3-Month USD-LIBOR 5.215% Semi-Annually 3/12/08 3/12/30 $(27,813)
JPMorgan 1,500,000 Pay SIFM 4.376 Quarterly 8/06/08 8/06/37 40,701
------------------------------------------------------------------------------------------------------------------------------------
$ 12,888
====================================================================================================================================
USD-LIBOR (United States Dollar-London Inter-Bank Offered Rate)
SIFM - The daily arithmetic average of the weekly SIFM (the Securities Industry
and Financial Markets) Municipal Swap Index.
The Fund may invest in "zero coupon" securities. A zero
coupon security does not pay a regular interest coupon to
its holders during the life of the security. Tax-exempt
income to the holder of the security comes from accretion of
the difference between the original purchase price of the
security at issuance and the par value of the security at
maturity and is effectively paid at maturity. Such
securities are included in the Portfolio of Investments with
a 0.000% coupon rate in their description. The market prices
of zero coupon securities generally are more volatile than
the market prices of securities that pay interest
periodically.
At least 80% of the Fund's net assets (including net assets
attributable to Preferred shares) are invested in municipal
securities that are either covered by Original Issue
Insurance, Secondary Market Insurance or Portfolio Insurance
which ensures the timely payment of principal and interest.
Up to 20% of the Fund's net assets (including net assets
attributable to Preferred shares) may be invested in
municipal securities that are (i) either backed by an escrow
or trust containing sufficient U.S. Government or U.S.
Government agency securities (also ensuring the timely
payment of principal and interest), or (ii) rated, at the
time of investment, within the four highest grades (Baa or
BBB or better by Moody's, S&P or Fitch) or unrated but
judged to be of comparable quality by the Adviser.
(1) All percentages shown in the Portfolio of Investments are
based on net assets applicable to Common shares unless
otherwise noted.
(2) Optional Call Provisions (not covered by the report of
independent registered public accounting firm): Dates (month
and year) and prices of the earliest optional call or
redemption. There may be other call provisions at varying
prices at later dates. Certain mortgage-backed securities
may be subject to periodic principal paydowns.
(3) Ratings (not covered by the report of independent registered
public accounting firm): Using the higher of Standard &
Poor's or Moody's rating. Ratings below BBB by Standard &
Poor's Group or Baa by Moody's Investor Service, Inc. are
considered to be below investment grade.
(4) Backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities which ensure
the timely payment of principal and interest. Such
investments are normally considered to be equivalent to AAA
rated securities.
(5) Effective date represents the date on which both the Fund
and counterparty commence interest payment accruals on each
forward swap contract.
WI/DD Purchased on a when-issued or delayed delivery basis.
(IF) Inverse floating rate investment.
See accompanying notes to financial statements.
67
Statement of
ASSETS & LIABILITIES
August 31, 2007
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
PREMIUM PREMIUM PREMIUM DIVIDEND
INCOME INCOME 2 INCOME ADVANTAGE
(NPC) (NCL) (NCU) (NAC)
------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $135,878,766
$266,239,322, $122,196,480 and
$514,017,691, respectively) $143,005,259 $274,390,497 $125,417,166 $529,128,148
Cash -- -- -- --
Receivables:
Interest 2,442,227 3,710,030 1,624,507 7,695,482
Investments sold -- 7,643,125 -- 2,620,122
Unrealized appreciation on forward swaps 364,728 656,230 40,701 2,275,676
Other assets 8,200 42,843 998 60,380
------------------------------------------------------------------------------------------------------------------------------------
Total assets 145,820,414 286,442,725 127,083,372 541,779,808
------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Cash overdraft 2,192,019 4,976,292 79,209 1,866,948
Floating rate obligations -- -- 2,352,000 9,928,000
Payable for investments purchased 984,700 1,235,799 -- 2,639,387
Unrealized depreciation on forward swaps -- -- 41,719 --
Accrued expenses:
Management fees 75,982 147,888 66,753 230,196
Other 37,934 72,990 39,952 96,273
Common share dividends payable 339,158 645,913 286,142 1,449,201
Preferred share dividends payable 14,241 20,344 17,908 46,384
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 3,644,034 7,099,226 2,883,683 16,256,389
------------------------------------------------------------------------------------------------------------------------------------
Preferred shares, at liquidation value 45,000,000 95,000,000 43,000,000 175,000,000
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $ 97,176,380 $184,343,499 $ 81,199,689 $350,523,419
====================================================================================================================================
Common shares outstanding 6,459,832 12,716,370 5,775,188 23,480,254
====================================================================================================================================
Net asset value per Common share outstanding
(net assets applicable to Common shares,
divided by Common shares outstanding) $ 15.04 $ 14.50 $ 14.06 $ 14.93
====================================================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
------------------------------------------------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 64,598 $ 127,164 $ 57,752 $ 234,803
Paid-in surplus 89,426,693 176,228,808 78,312,355 333,587,814
Undistributed (Over-distribution of) net investment income 158,730 (179,908) (60,685) (979,692)
Accumulated net realized gain (loss) from investments
and derivative transactions 35,138 (639,970) (329,401) 294,361
Net unrealized appreciation (depreciation ) of investments
and derivative transactions 7,491,221 8,807,405 3,219,668 17,386,133
====================================================================================================================================
Net assets applicable to Common shares $ 97,176,380 $184,343,499 $ 81,199,689 $350,523,419
====================================================================================================================================
Authorized shares:
Common 200,000,000 200,000,000 Unlimited Unlimited
Preferred 1,000,000 1,000,000 Unlimited Unlimited
====================================================================================================================================
See accompanying notes to financial statements.
68
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
DIVIDEND DIVIDEND DIVIDEND TAX-FREE
ADVANTAGE 2 ADVANTAGE 3 ADVANTAGE ADVANTAGE
(NVX) (NZH) (NKL) (NKX)
------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $323,736,433,
$527,776,728, $337,767,689 and
$129,322,546, respectively) $331,473,854 $534,827,053 $350,190,897 $132,290,482
Cash -- 309,341 -- --
Receivables:
Interest 4,369,741 7,571,844 4,119,556 1,536,141
Investments sold 1,078,285 973,416 -- 942,803
Unrealized appreciation on forward swaps 396,451 -- 135,670 40,701
Other assets 35,561 40,141 34,736 3,522
------------------------------------------------------------------------------------------------------------------------------------
Total assets 337,353,892 543,721,795 354,480,859 134,813,649
------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Cash overdraft 1,675,691 -- 6,022,335 3,248,892
Floating rate obligations 6,171,000 7,930,000 -- --
Payable for investments purchased 1,081,876 2,653,089 1,280,110 984,700
Unrealized depreciation on forward swaps -- 652,859 111,251 27,813
Accrued expenses:
Management fees 117,461 165,310 109,241 34,582
Other 69,082 105,263 77,524 35,880
Common share dividends payable 853,083 1,358,748 905,326 333,125
Preferred share dividends payable 53,951 50,469 51,630 4,994
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 10,022,144 12,915,738 8,557,417 4,669,986
------------------------------------------------------------------------------------------------------------------------------------
Preferred shares, at liquidation value 110,000,000 187,000,000 118,000,000 45,000,000
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $217,331,748 $343,806,057 $227,923,442 $ 85,143,663
====================================================================================================================================
Common shares outstanding 14,797,422 24,132,334 15,286,005 5,885,441
====================================================================================================================================
Net asset value per Common share outstanding
(net assets applicable to Common shares,
divided by Common shares outstanding) $ 14.69 $ 14.25 $ 14.91 $ 14.47
====================================================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
------------------------------------------------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 147,974 $ 241,323 $ 152,860 $ 58,854
Paid-in surplus 210,153,559 342,811,267 217,031,715 83,033,081
Undistributed (Over-distribution of) net investment income (655,912) (878,892) (520,310) (109,506)
Accumulated net realized gain (loss) from investments
and derivative transactions (447,745) (4,765,107) (1,188,450) (819,590)
Net unrealized appreciation (depreciation) of investments
and derivative transactions 8,133,872 6,397,466 12,447,627 2,980,824
====================================================================================================================================
Net assets applicable to Common shares $217,331,748 $343,806,057 $227,923,442 $ 85,143,663
====================================================================================================================================
Authorized shares:
Common Unlimited Unlimited Unlimited Unlimited
Preferred Unlimited Unlimited Unlimited Unlimited
====================================================================================================================================
See accompanying notes to financial statements.
69
Statement of
OPERATIONS
Year Ended August 31, 2007
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
PREMIUM PREMIUM PREMIUM DIVIDEND
INCOME INCOME 2 INCOME ADVANTAGE
(NPC) (NCL) (NCU) (NAC)
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME $ 7,031,075 $13,687,658 $ 6,236,823 $26,790,656
------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees 913,590 1,777,409 804,552 3,311,020
Preferred shares - auction fees 112,500 237,498 107,500 437,500
Preferred shares - dividend disbursing agent fees 10,000 20,000 10,000 20,000
Shareholders' servicing agent fees and expenses 7,873 13,110 5,327 4,607
Interest expense on floating rate obligations 63,326 109,082 68,181 173,473
Custodian's fees and expenses 32,304 75,378 32,079 123,272
Directors'/Trustees' fees and expenses 3,434 6,745 3,407 13,715
Professional fees 16,000 21,831 15,109 24,921
Shareholders' reports - printing and mailing expenses 15,684 24,060 12,083 36,470
Stock exchange listing fees 9,719 9,701 491 9,798
Investor relations expense 15,471 29,639 13,706 52,833
Other expenses 17,112 21,587 14,397 28,115
------------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 1,217,013 2,346,040 1,086,832 4,235,724
Custodian fee credit (20,787) (31,154) (19,380) (54,145)
Expense reimbursement -- -- -- (782,839)
------------------------------------------------------------------------------------------------------------------------------------
Net expenses 1,196,226 2,314,886 1,067,452 3,398,740
------------------------------------------------------------------------------------------------------------------------------------
Net investment income 5,834,849 11,372,772 5,169,371 23,391,916
------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments 132,902 (30,877) (251,856) 1,330,465
Forward swaps 159,600 419,200 (57,143) (824,000)
Futures -- -- -- 29,877
Change in net unrealized appreciation (depreciation) of:
Investments (2,928,553) (6,140,606) (2,648,488) (14,848,472)
Forward swaps 35,238 (181,996) (1,018) 1,437,247
Futures -- -- -- (27,339)
------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (2,600,813) (5,934,279) (2,958,505) (12,902,222)
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
From net investment income (1,373,537) (3,120,823) (1,400,856) (5,740,999)
From accumulated net realized gains (118,110) -- (50,482) (310,662)
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares
from distributions to Preferred shareholders (1,491,647) (3,120,823) (1,451,338) (6,051,661)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common shares
from operations $ 1,742,389 $ 2,317,670 $ 759,528 $ 4,438,033
====================================================================================================================================
See accompanying notes to financial statements.
70
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
DIVIDEND DIVIDEND DIVIDEND TAX-FREE
ADVANTAGE 2 ADVANTAGE 3 ADVANTAGE ADVANTAGE
(NVX) (NZH) (NKL) (NKX)
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME $16,258,218 $26,505,763 $17,230,829 $ 6,325,893
------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees 2,087,857 3,368,809 2,197,491 839,946
Preferred shares - auction fees 274,998 467,499 295,000 112,500
Preferred shares - dividend disbursing agent fees 20,000 29,772 20,000 10,000
Shareholders' servicing agent fees and expenses 1,847 3,004 1,727 880
Interest expense on floating rate obligations 189,943 208,643 130,142 51,830
Custodian's fees and expenses 126,440 120,054 79,388 30,622
Directors'/Trustees' fees and expenses 8,476 12,658 8,525 3,297
Professional fees 23,581 32,161 24,410 15,686
Shareholders' reports - printing and mailing expenses 30,959 41,958 31,021 14,857
Stock exchange listing fees 1,257 2,050 1,298 500
Investor relations expense 33,819 53,777 35,398 13,661
Other expenses 23,461 28,631 24,097 22,688
------------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 2,822,638 4,369,016 2,848,497 1,116,467
Custodian fee credit (40,518) (56,866) (26,681) (20,905)
Expense reimbursement (768,320) (1,388,618) (986,095) (424,418)
------------------------------------------------------------------------------------------------------------------------------------
Net expenses 2,013,800 2,923,532 1,835,721 671,144
------------------------------------------------------------------------------------------------------------------------------------
Net investment income 14,244,418 23,582,231 15,395,108 5,654,749
------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments (394,576) (1,177,206) 653,722 91,706
Forward swaps 352,500 (401,000) (200,000) (57,143)
Futures -- -- -- --
Change in net unrealized appreciation (depreciation) of:
Investments (8,830,002) (15,582,514) (8,944,129) (2,767,618)
Forward swaps (351,758) (652,859) 24,419 12,888
Futures -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (9,223,836) (17,813,579) (8,465,988) (2,720,167)
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
From net investment income (3,680,820) (6,425,421) (4,037,528) (1,431,890)
From accumulated net realized gains -- -- (10,666) --
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares
from distributions to Preferred shareholders (3,680,820) (6,425,421) (4,048,194) (1,431,890)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common shares
from operations $ 1,339,762 $ (656,769) $ 2,880,926 $ 1,502,692
====================================================================================================================================
See accompanying notes to financial statements.
71
Statement of
CHANGES in NET ASSETS
INSURED CALIFORNIA INSURED CALIFORNIA CALIFORNIA
PREMIUM INCOME (NPC) PREMIUM INCOME 2 (NCL) PREMIUM INCOME (NCU)
----------------------------- ----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
8/31/07 8/31/06 8/31/07 8/31/06 8/31/07 8/31/06
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 5,834,849 $ 5,915,395 $ 11,372,772 $ 11,430,157 $ 5,169,371 $ 5,122,184
Net realized gain (loss) from:
Investments 132,902 338,450 (30,877) 306,694 (251,856) 287,143
Forward swaps 159,600 -- 419,200 -- (57,143) --
Futures -- -- -- -- -- --
Change in net unrealized
appreciation (depreciation) of:
Investments (2,928,553) (3,110,907) (6,140,606) (4,684,758) (2,648,488) (2,003,316)
Forward swaps 35,238 329,490 (181,996) 838,226 (1,018) --
Futures -- -- -- -- -- --
Distributions to
Preferred shareholders:
From net investment income (1,373,537) (1,180,659) (3,120,823) (2,543,117) (1,400,856) (1,190,250)
From accumulated net
realized gains (118,110) (120,330) -- -- (50,482) (11,180)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares
from operations 1,742,389 2,171,439 2,317,670 5,347,202 759,528 2,204,581
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (4,725,196) (5,325,135) (8,545,402) (9,670,803) (3,863,107) (4,451,921)
From accumulated net
realized gains (486,696) (881,569) -- -- (177,846) (70,445)
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to
Common shares from distributions to
Common shareholders (5,211,892) (6,206,704) (8,545,402) (9,670,803) (4,040,953) (4,522,366)
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net proceeds from Common shares
issued to shareholders due to
reinvestment of distributions 65,214 106,152 -- -- 14,098 --
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares from
capital share transactions 65,214 106,152 -- -- 14,098 --
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
applicable to Common shares (3,404,289) (3,929,113) (6,227,732) (4,323,601) (3,267,327) (2,317,785)
Net assets applicable
to Common shares
at the beginning of year 100,580,669 104,509,782 190,571,231 194,894,832 84,467,016 86,784,801
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common
shares at the end of year $ 97,176,380 $100,580,669 $184,343,499 $190,571,231 $81,199,689 $84,467,016
====================================================================================================================================
Undistributed (Over-distribution of)
net investment income
at the end of year $ 158,730 $ 422,103 $ (179,908) $ 129,491 $ (60,685) $ 34,045
====================================================================================================================================
See accompanying notes to financial statements.
72
CALIFORNIA CALIFORNIA CALIFORNIA
DIVIDEND ADVANTAGE (NAC) DIVIDEND ADVANTAGE 2 (NVX) DIVIDEND ADVANTAGE 3 (NZH)
----------------------------- ----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
8/31/07 8/31/06 8/31/07 8/31/06 8/31/07 8/31/06
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 23,391,916 $ 23,690,415 $ 14,244,418 $ 14,317,853 $ 23,582,231 $ 23,480,537
Net realized gain (loss) from:
Investments 1,330,465 1,496,422 (394,576) 686,754 (1,177,206) 1,057,466
Forward swaps (824,000) -- 352,500 -- (401,000) --
Futures 29,877 102,063 -- -- -- --
Change in net unrealized
appreciation (depreciation) of:
Investments (14,848,472) (8,347,244) (8,830,002) (4,193,089) (15,582,514) (5,851,121)
Forward swaps 1,437,247 838,429 (351,758) 748,209 (652,859) --
Futures (27,339) 27,339 -- -- -- --
Distributions to
Preferred shareholders:
From net investment income (5,740,999) (4,964,723) (3,680,820) (3,160,483) (6,425,421) (5,401,864)
From accumulated net
realized gains (310,662) (111,335) -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares
from operations 4,438,033 12,731,366 1,339,762 8,399,244 (656,769) 13,285,018
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (18,656,213) (21,230,311) (11,272,438) (12,379,782) (18,308,241) (20,073,933)
From accumulated net
realized gains (1,250,132) (782,285) -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets
applicable to Common shares
from distributions to
Common shareholders (19,906,345) (22,012,596) (11,272,438) (12,379,782) (18,308,241) (20,073,933)
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net proceeds from Common shares
issued to shareholders due to
reinvestment of distributions 475,567 532,651 104,551 -- 298,310 --
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares from
capital share transactions 475,567 532,651 104,551 -- 298,310 --
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets applicable
to Common shares (14,992,745) (8,748,579) (9,828,125) (3,980,538) (18,666,700) (6,788,915)
Net assets applicable
to Common shares
at the beginning of year 365,516,164 374,264,743 227,159,873 231,140,411 362,472,757 369,261,672
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to
Common shares at
the end of year $350,523,419 $365,516,164 $217,331,748 $227,159,873 $343,806,057 $362,472,757
====================================================================================================================================
Undistributed (Over-distribution of)
net investment income
at the end of year $ (979,692) $ 136,735 $ (655,912) $ 53,273 $ (878,892) $ 283,661
====================================================================================================================================
See accompanying notes to financial statements.
73
Statement of
CHANGES in NET ASSETS (continued)
INSURED CALIFORNIA INSURED CALIFORNIA
DIVIDEND ADVANTAGE (NKL) TAX-FREE ADVANTAGE (NKX)
----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
8/31/07 8/31/06 8/31/07 8/31/06
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 15,395,108 $ 15,416,776 $ 5,654,749 $ 5,611,175
Net realized gain (loss) from:
Investments 653,722 106,122 91,706 38,746
Forward swaps (200,000) 772,782 (57,143) 297,454
Futures -- -- -- --
Change in net unrealized appreciation (depreciation) of:
Investments (8,944,129) (4,883,419) (2,767,618) (1,917,395)
Forward swaps 24,419 191,673 12,888 72,274
Futures -- -- -- --
Distributions to Preferred shareholders:
From net investment income (4,037,528) (3,404,610) (1,431,890) (1,222,097)
From accumulated net realized gains (10,666) -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares
from operations 2,880,926 8,199,324 1,502,692 2,880,157
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (11,778,209) (13,002,466) (4,166,045) (4,377,177)
From accumulated net realized gains (39,709) -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to
Common shares from distributions to
Common shareholders (11,817,918) (13,002,466) (4,166,045) (4,377,177)
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net proceeds from Common shares
issued to shareholders due to
reinvestment of distributions 335,845 73,640 32,211 --
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares from
capital share transactions 335,845 73,640 32,211 --
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares (8,601,147) (4,729,502) (2,631,142) (1,497,020)
Net assets applicable to Common
shares at the beginning of year 236,524,589 241,254,091 87,774,805 89,271,825
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common
shares at the end of year $227,923,442 $236,524,589 $85,143,663 $87,774,805
====================================================================================================================================
Undistributed (Over-distribution of)
net investment income
at the end of year $ (520,310) $ (95,484) $ (109,506) $ (166,320)
====================================================================================================================================
See accompanying notes to financial statements.
74
Notes to
FINANCIAL STATEMENTS
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
The California funds (the "Funds") covered in this report and their
corresponding Common share stock exchange symbols are Nuveen Insured California
Premium Income Municipal Fund, Inc. (NPC), Nuveen Insured California Premium
Income Municipal Fund 2, Inc. (NCL), Nuveen California Premium Income Municipal
Fund (NCU), Nuveen California Dividend Advantage Municipal Fund (NAC), Nuveen
California Dividend Advantage Municipal Fund 2 (NVX), Nuveen California Dividend
Advantage Municipal Fund 3 (NZH), Nuveen Insured California Dividend Advantage
Municipal Fund (NKL) and Nuveen Insured California Tax-Free Advantage Municipal
Fund (NKX). Common shares of Insured California Premium Income (NPC), Insured
California Premium Income 2 (NCL) and California Dividend Advantage (NAC) are
traded on the New York Stock Exchange while Common shares of California Premium
Income (NCU), California Dividend Advantage 2 (NVX), California Dividend
Advantage 3 (NZH), Insured California Dividend Advantage (NKL) and Insured
California Tax-Free Advantage (NKX) are traded on the American Stock Exchange.
The Funds are registered under the Investment Company Act of 1940, as amended,
as closed-end management investment companies.
Each Fund seeks to provide current income exempt from both regular federal and
California state income taxes, and in the case of Insured California Tax-Free
Advantage (NKX) the alternative minimum tax applicable to individuals, by
investing primarily in a diversified portfolio of municipal obligations issued
by state and local government authorities within the state of California or
certain U.S. territories.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with U.S.
generally accepted accounting principles.
Investment Valuation
The prices of municipal bonds in each Fund's investment portfolio are provided
by a pricing service approved by the Fund's Board of Directors/Trustees. When
market price quotes are not readily available (which is usually the case for
municipal securities), the pricing service may establish fair value based on
yields or prices of municipal bonds of comparable quality, type of issue,
coupon, maturity and rating, indications of value from securities dealers,
evaluations of anticipated cash flows or collateral and general market
conditions. Prices of forward swap contracts are also provided by an independent
pricing service approved by each Fund's Board of Directors/Trustees. Futures
contracts are valued using the closing settlement price, or, in the absence or
such a price, at the mean of the bid and asked prices. If the pricing service is
unable to supply a price for a municipal bond, forward swap contract or futures
contact, each Fund may use a market price or fair market value quote provided by
a major broker/dealer in such investments. If it is determined that the market
price or fair market value for an investment or derivative transaction is
unavailable or inappropriate, the Board of Directors/Trustees of the Funds, or
its designee, may establish a fair value for the investment. Temporary
investments in securities that have variable rate and demand features qualifying
them as short-term investments are valued at amortized cost, which approximates
market value.
Investment Transactions
Investment transactions are recorded on a trade date basis. Realized gains and
losses from transactions are determined on the specific identification method.
Investments purchased on a when-issued/delayed delivery basis may have extended
settlement periods. Any investments so purchased are subject to market
fluctuation during this period. The Funds have instructed the custodian to
segregate assets with a current value at least equal to the amount of the
when-issued/delayed delivery purchase commitments. At August 31, 2007, Insured
California Premium Income (NPC), Insured California Premium Income 2 (NCL),
California Dividend Advantage (NAC), California Dividend Advantage 2 (NVX),
California Dividend Advantage 3 (NZH), Insured California Dividend Advantage
(NKL) and Insured California Tax-Free Advantage (NKX) had outstanding
when-issued/delayed delivery purchase commitments of $984,700, $1,235,799,
$1,044,039, $650,235, $1,053,197, $1,280,110 and $984,700, respectively. There
were no such outstanding purchase commitments in California Premium Income
(NCU).
75
Notes to
FINANCIAL STATEMENTS (continued)
Investment Income
Interest income, which includes the amortization of premiums and accretion of
discounts for financial reporting purposes, is recorded on an accrual basis.
Investment income also includes paydown gains and losses, if any.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to distribute substantially all net investment income and net capital
gains to shareholders and to otherwise comply with the requirements of
Subchapter M of the Internal Revenue Code applicable to regulated investment
companies. Therefore, no federal income tax provision is required. Furthermore,
each Fund intends to satisfy conditions which will enable interest from
municipal securities, which is exempt from regular federal and California state
income taxes, and in the case of Insured California Tax-Free Advantage (NKX) the
alternative minimum tax applicable to individuals, to retain such tax-exempt
status when distributed to shareholders of the Funds. Net realized capital gains
and ordinary income distributions paid by the Funds are subject to federal
taxation.
Dividends and Distributions to Common Shareholders
Dividends from tax-exempt net investment income are declared monthly. Net
realized capital gains and/or market discount from investment transactions, if
any, are distributed to shareholders not less frequently than annually.
Furthermore, capital gains are distributed only to the extent they exceed
available capital loss carryforwards.
Distributions to Common shareholders of tax-exempt net investment income, net
realized capital gains and/or market discount, if any, are recorded on the
ex-dividend date. The amount and timing of distributions are determined in
accordance with federal income tax regulations, which may differ from U.S.
generally accepted accounting principles.
Preferred Shares
The Funds have issued and outstanding Preferred shares, $25,000 stated value per
share, as a means of effecting financial leverage. Each Fund's Preferred shares
are issued in one or more Series. The dividend rate paid by the Funds on each
Series is determined every seven days, pursuant to a dutch auction process
overseen by the auction agent, and is payable at the end of each rate period.
The number of Preferred shares outstanding, by Series and in total, for each
Fund is as follows:
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
PREMIUM PREMIUM PREMIUM DIVIDEND
INCOME INCOME 2 INCOME ADVANTAGE
(NPC) (NCL) (NCU) (NAC)
--------------------------------------------------------------------------------
Number of shares:
Series M -- -- 1,720 --
Series T 1,800 1,900 -- --
Series TH -- 1,900 -- 3,500
Series F -- -- -- 3,500
--------------------------------------------------------------------------------
Total 1,800 3,800 1,720 7,000
================================================================================
76
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
DIVIDEND DIVIDEND DIVIDEND TAX-FREE
ADVANTAGE 2 ADVANTAGE 3 ADVANTAGE ADVANTAGE
(NVX) (NZH) (NKL) (NKX)
--------------------------------------------------------------------------------
Number of shares:
Series M 2,200 3,740 -- --
Series T -- -- 2,360 --
Series TH -- 3,740 -- 1,800
Series F 2,200 -- 2,360 --
--------------------------------------------------------------------------------
Total 4,400 7,480 4,720 1,800
================================================================================
Insurance
Insured California Premium Income (NPC) and Insured California Premium Income 2
(NCL) invest only in municipal securities which are either covered by insurance
or are backed by an escrow or trust account containing sufficient U.S.
Government or U.S. Government agency securities, both of which ensure the timely
payment of principal and interest.
Insured California Dividend Advantage (NKL) and Insured California Tax-Free
Advantage (NKX) invest at least 80% of their net assets (including net assets
attributable to Preferred shares) in municipal securities that are covered by
insurance. Each Fund may also invest up to 20% of its net assets (including net
assets attributable to Preferred shares) in municipal securities which are
either (i) backed by an escrow or trust containing sufficient U.S. Government or
U.S. Government agency securities, or (ii) rated, at the time of investment,
within the four highest grades (Baa or BBB or better by Moody's, S&P or Fitch)
or unrated but judged to be of comparable quality by Nuveen Asset Management
(the "Adviser").
Each insured municipal security is covered by Original Issue Insurance,
Secondary Market Insurance or Portfolio Insurance. Such insurance does not
guarantee the market value of the municipal securities or the value of the
Funds' Common shares. Original Issue Insurance and Secondary Market Insurance
remain in effect as long as the municipal securities covered thereby remain
outstanding and the insurer remains in business, regardless of whether the Funds
ultimately dispose of such municipal securities. Consequently, the market value
of the municipal securities covered by Original Issue Insurance or Secondary
Market Insurance may reflect value attributable to the insurance. Portfolio
Insurance, in contrast, is effective only while the municipal securities are
held by the Funds. Accordingly, neither the prices used in determining the
market value of the underlying municipal securities nor the Common share net
asset value of the Funds include value, if any, attributable to the Portfolio
Insurance. Each policy of the Portfolio Insurance does, however, give the Funds
the right to obtain permanent insurance with respect to the municipal security
covered by the Portfolio Insurance policy at the time of its sale.
Inverse Floating Rate Securities
Each Fund may invest in inverse floating rate securities. An inverse floating
rate security is created by depositing a municipal bond, typically with a fixed
interest rate, into a special purpose trust created by a broker-dealer. In turn,
this trust (a) issues floating rate certificates, in face amounts equal to some
fraction of the deposited bond's par amount or market value, that typically pay
short-term tax-exempt interest rates to third parties, and (b) issues to a
long-term investor (such as one of the Funds) an inverse floating rate
certificate (sometimes referred to as an "inverse floater") that represents all
remaining or residual interest in the trust. The income received by the inverse
floater holder varies inversely with the short-term rate paid to the floating
rate certificates' holders, and in most circumstances the inverse floater holder
bears substantially all of the underlying bond's downside investment risk and
also benefits disproportionately from any potential appreciation of the
underlying bond's value. The price of an inverse floating rate security will be
more volatile than that of the underlying bond because the interest rate is
dependent on not only the fixed coupon rate of the underlying bond but also on
the short-term interest paid on the floating rate certificates, and because the
inverse floating rate security essentially bears the risk of loss of the greater
face value of the underlying bond.
A Fund may purchase an inverse floating rate security in a secondary market
transaction without first owning the underlying bond (referred to as an
"externally-deposited inverse floater"), or instead by first selling a
fixed-rate bond to a broker-dealer for deposit into the special purpose trust
and receiving in turn the residual interest in the trust (referred to as a
"self-deposited inverse floater"). An investment in an externally-deposited
inverse floater is identified in the Portfolio of Investments as an "Inverse
floating rate investment". An investment in a self-deposited inverse floater is
accounted for as a financing transaction in accordance with Statement of
Financial Accounting Standards (SFAS) No. 140 "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities". In such
instances, a fixed-rate bond deposited into a special purpose trust is
identified in the Portfolio of Investments as an "Underlying bond of an inverse
floating rate trust", with the Fund accounting for the short-term floating rate
certificates issued by the trust as "Floating rate obligations" on the Statement
of Assets and Liabilities. In addition, the Fund reflects in Investment Income
the entire earnings of the underlying bond and accounts for the related interest
paid to the holders of the short-term floating rate certificates as "Interest
expense on floating rate obligations" in the Statement of Operations.
77
Notes to
FINANCIAL STATEMENTS (continued)
During the fiscal year ended August 31, 2007, each Fund invested in externally
deposited inverse floaters and/or self-deposited inverse floaters.
The average floating rate obligations outstanding and average annual interest
rate and fees related to self-deposited inverse floaters during the fiscal year
ended August 31, 2007, were as follows:
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
PREMIUM PREMIUM PREMIUM DIVIDEND
INCOME INCOME 2 INCOME ADVANTAGE
(NPC) (NCL) (NCU) (NAC)
------------------------------------------------------------------------------------------------------------------
Average floating rate obligations $1,631,721 $2,811,233 $1,756,737 $4,463,690
Average annual interest rate and fees 3.88% 3.88% 3.88% 3.89%
==================================================================================================================
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
DIVIDEND DIVIDEND DIVIDEND TAX-FREE
ADVANTAGE 2 ADVANTAGE 3 ADVANTAGE ADVANTAGE
(NVX) (NZH) (NKL) (NKX)
------------------------------------------------------------------------------------------------------------------
Average floating rate obligations $4,889,101 $5,368,871 $3,349,236 $1,335,671
Average annual interest rate and fees 3.89% 3.89% 3.89% 3.88%
==================================================================================================================
Forward Swap Transactions
The Funds are authorized to invest in forward interest rate swap transactions.
The Funds' use of forward interest rate swap transactions is intended to help
the Fund manage its overall interest rate sensitivity, either shorter or longer,
generally to more closely align the Fund's interest rate sensitivity with that
of the broader municipal market. Forward interest rate swap transactions involve
each Fund's agreement with a counterparty to pay, in the future, a fixed or
variable rate payment in exchange for the counterparty paying the Fund a
variable or fixed rate payment, the accruals for which would begin at a
specified date in the future (the "effective date"). The amount of the payment
obligation is based on the notional amount of the forward swap contract and the
termination date of the swap (which is akin to a bond's maturity). The value of
the Fund's swap commitment would increase or decrease based primarily on the
extent to which long-term interest rates for bonds having a maturity of the
swap's termination date increases or decreases. The Funds may terminate a swap
contract prior to the effective date, at which point a realized gain or loss is
recognized. When a forward swap is terminated, it ordinarily does not involve
the delivery of securities or other underlying assets or principal, but rather
is settled in cash on a net basis. Each Fund intends, but is not obligated, to
terminate its forward swaps before the effective date. Accordingly, the risk of
loss with respect to the swap counterparty on such transactions is limited to
the credit risk associated with a counterparty failing to honor its commitment
to pay any realized gain to the Fund upon termination. To reduce such credit
risk, all counterparties are required to pledge collateral daily (based on the
daily valuation of each swap) on behalf of each Fund with a value approximately
equal to the amount of any unrealized gain above a pre-determined threshold.
Reciprocally, when any of the Funds have an unrealized loss on a swap contract,
the Funds have instructed the custodian to pledge assets of the Funds as
collateral with a value approximately equal to the amount of the unrealized loss
above a pre-determined threshold. Collateral pledges are monitored and
subsequently adjusted if and when the swap valuations fluctuate, either up or
down, by at least the predetermined threshold amount.
Futures Contracts
The Funds are authorized to invest in futures contracts. Upon entering into a
futures contract, a Fund is required to deposit with the broker an amount of
cash or liquid securities equal to a specified percentage of the contract
amount. This is known as the
78
"initial margin." Subsequent payments ("variation margin") are made or received
by a Fund each day, depending on the daily fluctuation of the value of the
contract.
During the period the futures contract is open, changes in the value of the
contract are recognized as an unrealized gain or loss by "marking-to-market" on
a daily basis to reflect the changes in market value of the contract. When the
contract is closed or expired, a Fund records a realized gain or loss equal to
the difference between the value of the contract on the closing date and value
of the contract when originally entered into. Cash held by the broker to cover
initial margin requirements on open futures contracts, if any, is recognized in
the Statement of Assets and Liabilities. Additionally, the Statement of Assets
and Liabilities reflects a receivable or payable for the variation margin when
applicable. None of the Funds invested in futures contracts during the fiscal
year ended August 31, 2007.
Risks of investments in futures contracts include the possible adverse movement
of the securities or indices underlying the contracts, the possibility that
there may not be a liquid secondary market for the contracts and/or that a
change in the value of the contract may not correlate with a change in the value
of the underlying securities or indices.
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby certain custodian
fees and expenses are reduced by net credits earned on each Fund's cash on
deposit with the bank. Such deposit arrangements are an alternative to overnight
investments. Credits for cash balances may be offset by charges for any days on
which the Fund overdraws its account at the custodian bank.
Indemnifications
Under the Funds' organizational documents, their Officers and Directors/Trustees
are indemnified against certain liabilities arising out of the performance of
their duties to the Funds. In addition, in the normal course of business, the
Funds enter into contracts that provide general indemnifications to other
parties. The Funds' maximum exposure under these arrangements is unknown as this
would involve future claims that may be made against the Funds that have not yet
occurred. However, the Funds have not had prior claims or losses pursuant to
these contracts and expect the risk of loss to be remote.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of increases and
decreases in net assets applicable to Common shares from operations during the
reporting period. Actual results may differ from those estimates.
2. FUND SHARES
Transactions in Common shares were as follows:
INSURED CALIFORNIA INSURED CALIFORNIA CALIFORNIA
PREMIUM INCOME (NPC) PREMIUM INCOME 2 (NCL) PREMIUM INCOME (NCU)
---------------------- ---------------------- ---------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
8/31/07 8/31/06 8/31/07 8/31/06 8/31/07 8/31/06
------------------------------------------------------------------------------------------------------------------
Common shares issued to shareholders
due to reinvestment of distributions 4,166 6,731 -- -- 972 --
==================================================================================================================
CALIFORNIA DIVIDEND CALIFORNIA DIVIDEND CALIFORNIA DIVIDEND
ADVANTAGE (NAC) ADVANTAGE 2 (NVX) ADVANTAGE 3 (NZH)
---------------------- ---------------------- ---------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
8/31/07 8/31/06 8/31/07 8/31/06 8/31/07 8/31/06
------------------------------------------------------------------------------------------------------------------
Common shares issued to shareholders
due to reinvestment of distributions 29,993 33,399 6,762 -- 19,501 --
==================================================================================================================
INSURED INSURED
CALIFORNIA DIVIDEND CALIFORNIA TAX-FREE
ADVANTAGE (NKL) ADVANTAGE (NKX)
--------------------- ---------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
8/31/07 8/31/06 8/31/07 8/31/06
------------------------------------------------------------------------------------------------------------------
Common shares issued to shareholders
due to reinvestment of distributions 21,450 4,796 2,139 --
==================================================================================================================
79
Notes to
FINANCIAL STATEMENTS (continued)
3. INVESTMENT TRANSACTIONS
Purchases and sales (including maturities but excluding short-term investments
and derivative transactions) during the fiscal year ended August 31, 2007, were
as follows:
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
PREMIUM PREMIUM PREMIUM DIVIDEND
INCOME INCOME 2 INCOME ADVANTAGE
(NPC) (NCL) (NCU) (NAC)
-----------------------------------------------------------------------------------------------------------------
Purchases $15,080,307 $53,060,171 $17,669,993 $115,344,315
Sales and maturities 12,664,907 54,432,465 14,085,295 106,136,668
=================================================================================================================
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
DIVIDEND DIVIDEND DIVIDEND TAX-FREE
ADVANTAGE 2 ADVANTAGE 3 ADVANTAGE ADVANTAGE
(NVX) (NZH) (NKL) (NKX)
-----------------------------------------------------------------------------------------------------------------
Purchases $78,474,713 $133,911,052 $47,900,732 $24,311,297
Sales and maturities 69,990,071 126,244,889 41,006,704 20,223,829
=================================================================================================================
4. INCOME TAX INFORMATION
The following information is presented on an income tax basis. Differences
between amounts for financial statement and federal income tax purposes are
primarily due to the treatment of paydown gains and losses, timing differences
in recognizing taxable market discount, timing differences in recognizing
certain gains and losses on investment transactions and the treatment of
investments in inverse floating rate transactions subject to SFAS No.140. To the
extent that differences arise that are permanent in nature, such amounts are
reclassified within the capital accounts on the Statement of Assets and
Liabilities presented in the annual report, based on their federal tax basis
treatment; temporary differences do not require reclassification. Temporary and
permanent differences do not impact the net asset values of the Funds.
At August 31, 2007, the cost of investments was as follows:
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
PREMIUM PREMIUM PREMIUM DIVIDEND
INCOME INCOME 2 INCOME ADVANTAGE
(NPC) (NCL) (NCU) (NAC)
-----------------------------------------------------------------------------------------------------------------
Cost of investments $136,029,264 $266,072,310 $119,782,187 $503,958,400
=================================================================================================================
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
DIVIDEND DIVIDEND DIVIDEND TAX-FREE
ADVANTAGE 2 ADVANTAGE 3 ADVANTAGE ADVANTAGE
(NVX) (NZH) (NKL) (NKX)
-----------------------------------------------------------------------------------------------------------------
Cost of investments $317,915,091 $519,875,478 $339,173,823 $129,698,864
=================================================================================================================
80
Gross unrealized appreciation and gross unrealized depreciation of investments
at August 31, 2007, were as follows:
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
PREMIUM PREMIUM PREMIUM DIVIDEND
INCOME INCOME 2 INCOME ADVANTAGE
(NPC) (NCL) (NCU) (NAC)
------------------------------------------------------------------------------------------------------------------
Gross unrealized:
Appreciation $7,468,466 $9,424,861 $3,947,786 $19,631,656
Depreciation (492,471) (1,106,674) (661,008) (4,373,260)
------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investments $6,975,995 $8,318,187 $3,286,778 $15,258,396
==================================================================================================================
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
DIVIDEND DIVIDEND DIVIDEND TAX-FREE
ADVANTAGE 2 ADVANTAGE 3 ADVANTAGE ADVANTAGE
(NVX) (NZH) (NKL) (NKX)
------------------------------------------------------------------------------------------------------------------
Gross unrealized:
Appreciation $11,083,564 $14,638,105 $14,492,539 $ 3,830,177
Depreciation (3,685,389) (7,603,327) (3,475,465) (1,238,559)
------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments $ 7,398,175 $ 7,034,778 $11,017,074 $ 2,591,618
==================================================================================================================
The tax components of undistributed net tax-exempt income, net ordinary income
and net long-term capital gains at August 31, 2007, the Funds' tax year end,
were as follows:
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
PREMIUM PREMIUM PREMIUM DIVIDEND
INCOME INCOME 2 INCOME ADVANTAGE
(NPC) (NCL) (NCU) (NAC)
-----------------------------------------------------------------------------------------------------------------
Undistributed net tax-exempt income * $520,376 $377,220 $194,292 $444,969
Undistributed net ordinary income ** 212,281 4,534 -- --
Undistributed net long-term capital gains 16,768 -- 886 294,361
=================================================================================================================
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
DIVIDEND DIVIDEND DIVIDEND TAX-FREE
ADVANTAGE 2 ADVANTAGE 3 ADVANTAGE ADVANTAGE
(NVX) (NZH) (NKL) (NKX)
-----------------------------------------------------------------------------------------------------------------
Undistributed net tax-exempt income * $268,220 $585,805 $239,745 $226,861
Undistributed net ordinary income ** -- -- -- --
Undistributed net long-term capital gains -- -- 456,991 --
=================================================================================================================
* Undistributed net tax-exempt income (on a tax basis) has not been reduced
for the dividend declared on August 1, 2007, paid on September 4, 2007.
** Net ordinary income consists of taxable market discount income and net
short-term capital gains, if any.
The tax character of distributions paid during the Funds' tax years ended August
31, 2007 and August 31, 2006, was designated for purposes of the dividends paid
deduction as follows:
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
PREMIUM PREMIUM PREMIUM DIVIDEND
INCOME INCOME 2 INCOME ADVANTAGE
2007 (NPC) (NCL) (NCU) (NAC)
-----------------------------------------------------------------------------------------------------------------
Distributions from net tax-exempt income *** $6,064,156 $11,716,879 $5,291,072 $24,556,552
Distributions from net ordinary income ** 46,600 -- -- 395
Distributions from net long-term capital gains **** 604,806 -- 228,328 1,560,803
=================================================================================================================
81
Notes to
FINANCIAL STATEMENTS (continued)
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
DIVIDEND DIVIDEND DIVIDEND TAX-FREE
ADVANTAGE 2 ADVANTAGE 3 ADVANTAGE ADVANTAGE
2007 (NVX) (NZH) (NKL) (NKX)
-----------------------------------------------------------------------------------------------------------------
Distributions from net tax-exempt income *** $15,011,893 $24,913,042 $15,884,429 $5,618,698
Distributions from net ordinary income ** -- -- -- --
Distributions from net long-term capital gains **** -- -- 50,375 --
=================================================================================================================
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
PREMIUM PREMIUM PREMIUM DIVIDEND
INCOME INCOME 2 INCOME ADVANTAGE
2006 (NPC) (NCL) (NCU) (NAC)
-----------------------------------------------------------------------------------------------------------------
Distributions from net tax-exempt income $6,489,050 $12,330,721 $5,697,561 $26,436,381
Distributions from net ordinary income ** 79,771 -- -- --
Distributions from net long-term capital gains 1,001,943 -- 81,625 893,620
=================================================================================================================
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
DIVIDEND DIVIDEND DIVIDEND TAX-FREE
ADVANTAGE 2 ADVANTAGE 3 ADVANTAGE ADVANTAGE
2006 (NVX) (NZH) (NKL) (NKX)
-----------------------------------------------------------------------------------------------------------------
Distributions from net tax-exempt income $15,681,327 $25,609,086 $16,451,218 $5,633,072
Distributions from net ordinary income ** -- -- -- --
Distributions from net long-term capital gains -- -- -- --
=================================================================================================================
** Net ordinary income consists of taxable market discount income and net
short-term capital gains, if any.
*** The Funds hereby designate these amounts paid during the fiscal year ended
August 31, 2007, as Exempt Interest Dividends.
**** The Funds herby designate these amounts paid during the fiscal year ended
August 31, 2007, as long-term capital gain dividends pursuant to Internal
Revenue Code Section 852(b)(3).
At August 31, 2007, the Funds' tax year end, the following Funds had unused
capital loss carryforwards available for federal income tax purposes to be
applied against future capital gains, if any. If not applied, the carryforwards
will expire as follows:
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
PREMIUM DIVIDEND DIVIDEND TAX-FREE
INCOME 2 ADVANTAGE 2 ADVANTAGE 3 ADVANTAGE
(NCL) (NVX) (NZH) (NKX)
-----------------------------------------------------------------------------------------------------------------
Expiration year:
2009 $199,461 $ -- $ -- $ --
2010 440,509 -- -- --
2011 -- -- 2,816,212 218,696
2012 -- 90,840 323,840 --
2013 -- -- -- 59,857
2014 -- -- -- 85,788
-----------------------------------------------------------------------------------------------------------------
Total $639,970 $ 90,840 $3,140,052 $364,341
=================================================================================================================
82
The following Funds have elected to defer net realized losses from investments
incurred from November 1, 2006 through August 31, 2007 ("post-October losses")
in accordance with federal income tax regulations. Post-October losses are
treated as having arisen on the first day of the following fiscal year:
INSURED
CALIFORNIA CALIFORNIA CALIFORNIA
PREMIUM DIVIDEND TAX-FREE
INCOME ADVANTAGE 3 ADVANTAGE
(NCU) (NZH) (NKX)
--------------------------------------------------------------------------------
$324,473 $1,599,933 $63,065
================================================================================
5. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Each Fund's management fee is separated into two components - a complex-level
component, based on the aggregate amount of all fund assets managed by the
Adviser, a wholly owned subsidiary of Nuveen Investments, Inc. ("Nuveen"), and a
specific fund-level component, based only on the amount of assets within each
individual fund. This pricing structure enables Nuveen fund shareholders to
benefit from growth in the assets within each individual fund as well as from
growth in the amount of complex-wide assets managed by the Adviser.
The annual fund-level fee, payable monthly, for each Fund is based upon the
average daily net assets (including net assets attributable to Preferred shares)
of each Fund as follows:
INSURED CALIFORNIA PREMIUM INCOME (NPC)
AVERAGE DAILY NET ASSETS INSURED CALIFORNIA PREMIUM INCOME 2 (NCL)
(INCLUDING NET ASSETS CALIFORNIA PREMIUM INCOME (NCU)
ATTRIBUTABLE TO PREFERRED SHARES) FUND-LEVEL FEE RATE
--------------------------------------------------------------------------------
For the first $125 million .4500%
For the next $125 million .4375
For the next $250 million .4250
For the next $500 million .4125
For the next $1 billion .4000
For the next $3 billion .3875
For net assets over $5 billion .3750
================================================================================
CALIFORNIA DIVIDEND ADVANTAGE (NAC)
CALIFORNIA DIVIDEND ADVANTAGE 2 (NVX)
CALIFORNIA DIVIDEND ADVANTAGE 3 (NZH)
AVERAGE DAILY NET ASSETS INSURED CALIFORNIA DIVIDEND ADVANTAGE (NKL)
(INCLUDING NET ASSETS INSURED CALIFORNIA TAX-FREE ADVANTAGE (NKX)
ATTRIBUTABLE TO PREFERRED SHARES) FUND-LEVEL FEE RATE
--------------------------------------------------------------------------------
For the first $125 million .4500%
For the next $125 million .4375
For the next $250 million .4250
For the next $500 million .4125
For the next $1 billion .4000
For net assets over $2 billion .3750
================================================================================
The annual complex-level fee, payable monthly, which is additive to the
fund-level fee, for all Nuveen sponsored funds in the U.S., is based on the
aggregate amount of total fund assets managed as stated in the table below. As
of August 31, 2007, the complex-level fee rate was .1841%.
83
Notes to
FINANCIAL STATEMENTS (continued)
Effective August 20, 2007, the complex-level fee schedule is as follows:
COMPLEX-LEVEL ASSET BREAKPOINT LEVEL (1) EFFECTIVE RATE AT BREAKPOINT LEVEL
--------------------------------------------------------------------------------
$55 billion .2000%
$56 billion .1996
$57 billion .1989
$60 billion .1961
$63 billion .1931
$66 billion .1900
$71 billion .1851
$76 billion .1806
$80 billion .1773
$91 billion .1691
$125 billion .1599
$200 billion .1505
$250 billion .1469
$300 billion .1445
================================================================================
Prior to August 20, 2007, the complex-level fee schedule was as follows:
COMPLEX-LEVEL ASSET BREAKPOINT LEVEL (1) EFFECTIVE RATE AT BREAKPOINT LEVEL
--------------------------------------------------------------------------------
$55 billion .2000%
$56 billion .1996
$57 billion .1989
$60 billion .1961
$63 billion .1931
$66 billion .1900
$71 billion .1851
$76 billion .1806
$80 billion .1773
$91 billion .1698
$125 billion .1617
$200 billion .1536
$250 billion .1509
$300 billion .1490
================================================================================
(1) The complex-level fee component of the management fee for the funds is
calculated based upon the aggregate Managed Assets ("Managed Assets" means
the average daily net assets of each fund including assets attributable to
preferred stock issued by or borrowings by the Nuveen funds) of
Nuveen-sponsored funds in the U.S.
The management fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. The Funds pay no
compensation directly to those of its Directors/Trustees who are affiliated with
the Adviser or to its Officers, all of whom receive remuneration for their
services to the Funds from the Adviser or its affiliates. The Board of
Directors/Trustees has adopted a deferred compensation plan for independent
Directors/Trustees that enables Directors/Trustees to elect to defer receipt of
all or a portion of the annual compensation they are entitled to receive from
certain Nuveen advised funds. Under the plan, deferred amounts are treated as
though equal dollar amounts had been invested in shares of select Nuveen advised
funds.
84
For the first ten years of California Dividend Advantage's (NAC) operations, the
Adviser has agreed to reimburse the Fund, as a percentage of average daily net
assets (including net assets attributable to Preferred shares), for fees and
expenses in the amounts and for the time periods set forth below:
YEAR ENDING YEAR ENDING
JULY 31, JULY 31,
--------------------------------------------------------------------------------
1999* .30% 2005 .25%
2000 .30 2006 .20
2001 .30 2007 .15
2002 .30 2008 .10
2003 .30 2009 .05
2004 .30
================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse California Dividend Advantage (NAC) for
any portion of its fees and expenses beyond July 31, 2009.
For the first ten years of California Dividend Advantage 2's (NVX) operations,
the Adviser has agreed to reimburse the Fund, as a percentage of average daily
net assets (including net assets attributable to Preferred shares), for fees and
expenses in the amounts and for the time periods set forth below:
YEAR ENDING YEAR ENDING
MARCH 31, MARCH 31,
--------------------------------------------------------------------------------
2001* .30% 2007 .25%
2002 .30 2008 .20
2003 .30 2009 .15
2004 .30 2010 .10
2005 .30 2011 .05
2006 .30
================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse California Dividend Advantage 2 (NVX)
for any portion of its fees and expenses beyond March 31, 2011.
For the first ten years of California Dividend Advantage 3's (NZH) operations,
the Adviser has agreed to reimburse the Fund, as a percentage of average daily
net assets (including net assets attributable to Preferred shares), for fees and
expenses in the amounts and for the time periods set forth below:
YEAR ENDING YEAR ENDING
SEPTEMBER 30, SEPTEMBER 30,
--------------------------------------------------------------------------------
2001* .30% 2007 .25%
2002 .30 2008 .20
2003 .30 2009 .15
2004 .30 2010 .10
2005 .30 2011 .05
2006 .30
================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse California Dividend Advantage 3 (NZH)
for any portion of its fees and expenses beyond September 30, 2011.
85
Notes to
FINANCIAL STATEMENTS (continued)
For the first ten years of Insured California Dividend Advantage's (NKL)
operations, the Adviser has agreed to reimburse the Fund, as a percentage of
average daily net assets (including net assets attributable to Preferred
shares), for fees and expenses in the amounts and for the time periods set forth
below:
YEAR ENDING YEAR ENDING
MARCH 31, MARCH 31,
--------------------------------------------------------------------------------
2002* .30% 2008 .25%
2003 .30 2009 .20
2004 .30 2010 .15
2005 .30 2011 .10
2006 .30 2012 .05
2007 .30
================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse Insured California Dividend Advantage
(NKL) for any portion of its fees and expenses beyond March 31, 2012.
For the first eight years of Insured California Tax-Free Advantage's (NKX)
operations, the Adviser has agreed to reimburse the Fund, as a percentage of
average daily net assets (including net assets attributable to Preferred
shares), for fees and expenses in the amounts and for the time periods set forth
below:
YEAR ENDING YEAR ENDING
NOVEMBER 30, NOVEMBER 30,
--------------------------------------------------------------------------------
2002* .32% 2007 .32%
2003 .32 2008 .24
2004 .32 2009 .16
2005 .32 2010 .08
2006 .32
================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse Insured California Tax-Free Advantage
(NKX) for any portion of its fees and expenses beyond November 30, 2010.
Agreement and Plan of Merger
On June 20, 2007, Nuveen Investments announced that it had entered into a
definitive Agreement and Plan of Merger ("Merger Agreement") with Windy City
Investments, Inc. ("Windy City"), a corporation formed by investors led by
Madison Dearborn Partners, LLC, pursuant to which Windy City would acquire
Nuveen Investments. Madison Dearborn Partners, LLC is a private equity
investment firm based in Chicago, Illinois. The investors include an affiliate
of Merrill Lynch. It is anticipated that Merrill Lynch and its affiliates will
be indirect "affiliated persons" (as that term is defined in the Investment
Company Act of 1940) of the Funds upon and after the acquisition. One important
implication of this is that the Funds will not be able to buy securities from or
sell securities to Merrill Lynch; however, the portfolio management teams and
Fund management do not expect that this will significantly impact the ability of
the Funds to pursue their investment objectives and policies. Under the terms of
the merger, each outstanding share of Nuveen Investments' common stock (other
than dissenting shares) will be converted into the right to receive a specified
amount of cash, without interest. The merger is expected to be completed by the
end of the year, subject to customary conditions. The obligations of Windy City
to consummate the merger are not conditioned on its obtaining financing.
86
The consummation of the merger will be deemed to be an "assignment" (as defined
in the 1940 Act) of the investment management agreement between each Fund and
the Adviser, and will result in the automatic termination of each Fund's
agreement. The Board of Directors/Trustees of each Fund has approved a new
investment management agreement with the Adviser. On October 12, 2007, at a
meeting of the respective Funds' shareholders, Insured California Premium Income
(NPC), Income California Premium Income 2 (NCL), California Premium Income (NCU)
and California Dividend Advantage (NAC) received the required number of
shareholder votes to approve the new investment management agreements. On
October 22, 2007, at a meeting of Insured California Tax-Free Advantage's (NKX)
shareholders, the Fund received the required number of shareholder votes to
approve the new investment management agreement. The new agreements will take
effect upon consummation of the merger of Nuveen Investments and Windy City.
California Dividend Advantage 2 (NVX), California Dividend Advantage 3 (NZH) and
Insured California Dividend Advantage (NKL) adjourned their shareholder meetings
prior to obtaining the necessary shareholder approval, and will continue to
solicit shareholder votes until they reconvene on November 8, 2007. There can be
no assurance that the merger described above will be consummated as contemplated
or that necessary shareholder approvals will be obtained.
6. NEW ACCOUNTING PRONOUNCEMENTS
Financial Accounting Standards Board Interpretation No. 48
On July 13, 2006, the Financial Accounting Standards Board (FASB) released FASB
Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" (FIN 48). FIN
48 provides guidance for how uncertain tax positions should be recognized,
measured, presented and disclosed in the financial statements. FIN 48 requires
the evaluation of tax positions taken or expected to be taken in the course of
preparing the Funds' tax returns to determine whether the tax positions are
"more-likely-than-not" of being sustained by the applicable tax authority. Tax
positions not deemed to meet the more-likely-than-not threshold would be
recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is
required for fiscal years beginning after December 15, 2006, and is to be
applied to all open tax years as of the effective date. Recent SEC guidance
allows funds to delay implementing FIN 48 into NAV calculations until the fund's
last NAV calculation in the first required financial statement reporting period.
As a result, the Funds must begin to incorporate FIN 48 into their NAV
calculations by February 29, 2008. At this time, management is continuing to
evaluate the implications of FIN 48 and does not expect the adoption of FIN 48
will have a significant impact on the net assets or results of operations of the
Funds.
Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 157
In September 2006, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 157, "Fair Value
Measurements." This standard establishes a single authoritative definition of
fair value, sets out a framework for measuring fair value and requires
additional disclosures about fair value measurements. SFAS No. 157 applies to
fair value measurements already required or permitted by existing standards.
SFAS No. 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods within those fiscal
years. The changes to current generally accepted accounting principles from the
application of this standard relate to the definition of fair value, the methods
used to measure fair value, and the expanded disclosures about fair value
measurements. As of August 31, 2007, management does not believe the adoption of
SFAS No. 157 will impact the financial statement amounts; however, additional
disclosures may be required about the inputs used to develop the measurements
and the effect of certain of the measurements included within the Statement of
Operations for the period.
7. SUBSEQUENT EVENTS
Distributions to Common Shareholders
The Funds declared Common share dividend distributions from their tax-exempt net
investment income which were paid on October 1, 2007, to shareholders of record
on September 15, 2007, as follows:
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
PREMIUM PREMIUM PREMIUM DIVIDEND
INCOME INCOME 2 INCOME ADVANTAGE
(NPC) (NCL) (NCU) (NAC)
-----------------------------------------------------------------------------------------------------------------
Dividend per share $.0605 $.0560 $.0535 $.0615
=================================================================================================================
INSURED INSURED
CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA
DIVIDEND DIVIDEND DIVIDEND TAX-FREE
ADVANTAGE 2 ADVANTAGE 3 ADVANTAGE ADVANTAGE
(NVX) (NZH) (NKL) (NKX)
-----------------------------------------------------------------------------------------------------------------
Dividend per share $.0600 $.0590 $.0620 $.0590
=================================================================================================================
87
Financial
HIGHLIGHTS
Selected data for a Common share outstanding throughout each period:
Investment Operations Less Distributions
------------------------------------------------------------------- --------------------------------
Distributions Distributions
from Net from Net
Beginning Investment Capital Investment Capital
Common Net Income to Gains to Income to Gains to
Share Net Realized/ Preferred Preferred Common Common
Net Asset Investment Unrealized Share- Share- Share- Share-
Value Income Gain (Loss) holders+ holders+ Total holders holders Total
====================================================================================================================================
INSURED CALIFORNIA
PREMIUM INCOME (NPC)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2007 $15.58 $ .90 $(.40) $(.21) $(.02) $ .27 $(.73) $(.08) $(.81)
2006 16.21 .92 (.38) (.18) (.02) .34 (.83) (.14) (.97)
2005 16.23 .95 .22 (.10) (.01) 1.06 (.92) (.16) (1.08)
2004 15.59 .99 .68 (.05) -- 1.62 (.93) (.05) (.98)
2003 16.17 .99 (.45) (.06) (.01) .47 (.97) (.08) (1.05)
INSURED CALIFORNIA
PREMIUM INCOME 2 (NCL)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2007 14.99 .89 (.46) (.25) -- .18 (.67) -- (.67)
2006 15.33 .90 (.28) (.20) -- .42 (.76) -- (.76)
2005 15.12 .91 .29 (.11) -- 1.09 (.88) -- (.88)
2004 14.60 .96 .53 (.06) -- 1.43 (.91) -- (.91)
2003 15.08 .99 (.51) (.07) -- .41 (.89) -- (.89)
====================================================================================================================================
Total Returns
----------------------
Offering Based
Costs and Ending on
Preferred Common Based Common
Share Share Ending on Share Net
Underwriting Asset Market Market Asset
Discounts Value Value Value* Value*
=========================================================================================
INSURED CALIFORNIA
PREMIUM INCOME (NPC)
-----------------------------------------------------------------------------------------
Year Ended 8/31:
2007 $ -- $15.04 $14.96 4.61% 1.70%
2006 -- 15.58 15.08 1.00 2.23
2005 -- 16.21 15.90 7.58 6.74
2004 -- 16.23 15.81 11.80 10.64
2003 -- 15.59 15.07 1.55 2.82
INSURED CALIFORNIA
PREMIUM INCOME 2 (NCL)
-----------------------------------------------------------------------------------------
Year Ended 8/31:
2007 -- 14.50 13.71 1.26 1.18
2006 -- 14.99 14.19 (.63) 2.91
2005 -- 15.33 15.05 5.10 7.42
2004 -- 15.12 15.18 12.71 10.02
2003 -- 14.60 14.32 2.69 2.71
=========================================================================================
Ratios/Supplemental Data
--------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets Ratios to Average Net Assets
Applicable to Common Shares Applicable to Common Shares
Before Credit/Reimbursement After Credit/Reimbursement**
-------------------------------------------- --------------------------------------------
Ending
Net
Assets
Applicable Expenses Expenses Net Expenses Expenses Net Portfolio
to Common Including Excluding Investment Including Excluding Investment Turnover
Shares (000) Interest++(a) Interest++(a) Income++ Interest++(a) Interest++(a) Income++ Rate
====================================================================================================================================
INSURED CALIFORNIA
PREMIUM INCOME (NPC)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2007 $ 97,176 1.22% 1.16% 5.84% 1.20% 1.14% 5.87% 9%
2006 100,581 1.16 1.16 5.89 1.15 1.15 5.90 9
2005 104,510 1.14 1.14 5.85 1.13 1.13 5.86 9
2004 104,618 1.17 1.17 6.17 1.16 1.16 6.17 25
2003 100,427 1.17 1.17 6.13 1.16 1.16 6.14 26
INSURED CALIFORNIA
PREMIUM INCOME 2 (NCL)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2007 184,343 1.24 1.18 6.00 1.22 1.17 6.01 19
2006 190,571 1.20 1.20 6.05 1.19 1.19 6.05 14
2005 194,895 1.17 1.17 6.03 1.17 1.17 6.03 7
2004 192,035 1.19 1.19 6.38 1.19 1.19 6.38 35
2003 185,181 1.20 1.20 6.53 1.19 1.19 6.54 22
====================================================================================================================================
Floating Rate Obligations
Preferred Shares at End of Period at End of Period
-------------------------------------- -------------------------
Aggregate Liquidation Aggregate
Amount and Market Asset Amount Asset
Outstanding Value Coverage Outstanding Coverage
(000) Per Share Per Share (000) Per $1,000
================================================================================
INSURED CALIFORNIA PREMIUM INCOME (NPC)
--------------------------------------------------------------------------------
Year Ended 8/31:
2007 $45,000 $25,000 $78,987 $ -- $ --
2006 45,000 25,000 80,878 -- --
2005 45,000 25,000 83,061 -- --
2004 45,000 25,000 83,121 -- --
2003 45,000 25,000 80,793 -- --
INSURED CALIFORNIA PREMIUM INCOME 2 (NCL)
--------------------------------------------------------------------------------
Year Ended 8/31:
2007 95,000 25,000 73,511 -- --
2006 95,000 25,000 75,150 -- --
2005 95,000 25,000 76,288 -- --
2004 95,000 25,000 75,535 -- --
2003 95,000 25,000 73,732 -- --
================================================================================
* Total Return on Market Value is the combination of changes in the market
price per share and the effect of reinvested dividend income and reinvested
capital gains distributions, if any, at the average price paid per share at
the time of reinvestment. The last dividend declared in the period, which
is typically paid on the first business day of the following month, is
assumed to be reinvested at the ending market price. The actual
reinvestment for the last dividend declared in the period takes place over
several days, and in some instances may not be based on the market price,
so the actual reinvestment price may be different from the price used in
the calculation. Total returns are not annualized.
Total Return on Common Share Net Asset Value is the combination of changes
in Common share net asset value, reinvested dividend income at net asset
value and reinvested capital gains distributions at net asset value, if
any. The last dividend declared in the period, which is typically paid on
the first business day of the following month, is assumed to be reinvested
at the ending net asset value. The actual reinvest price for the last
dividend declared in the period may often be based on the Fund's market
price (and not its net asset value), and therefore may be different from
the price used in the calculation. Total returns are not annualized.
** After custodian fee credit and expense reimbursement, where applicable.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders; income ratios reflect income earned on assets attributable to
Preferred shares.
(a) Interest expense arises from the application of SFAS No. 140 to certain
inverse floating rate transactions entered into by the Fund as more fully
described in Footnote 1 - Inverse Floating Rate Securities.
See accompanying notes to financial statements.
88-89 spreaed
Financial
HIGHLIGHTS (continued)
Selected data for a Common share outstanding throughout each period:
Investment Operations Less Distributions
------------------------------------------------------------------- --------------------------------
Distributions Distributions
from Net from Net
Beginning Investment Capital Investment Capital
Common Net Income to Gains to Income to Gains to
Share Net Realized/ Preferred Preferred Common Common
Net Asset Investment Unrealized Share- Share- Share- Share-
Value Income Gain (Loss) holders+ holders+ Total holders holders Total
====================================================================================================================================
CALIFORNIA PREMIUM
INCOME (NCU)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2007 $14.63 $ .90 $(.52) $(.24) $(.01) $ .13 $(.67) $(.03) $(.70)
2006 15.03 .89 (.30) (.21) -- .38 (.77) (.01) (.78)
2005 14.51 .90 .60 (.12) -- 1.38 (.86) -- (.86)
2004 13.66 .94 .85 (.06) -- 1.73 (.88) -- (.88)
2003 14.42 .96 (.78) (.07) -- .11 (.87) -- (.87)
CALIFORNIA DIVIDEND
ADVANTAGE (NAC)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2007 15.59 1.00 (.56) (.24) (.01) .19 (.80) (.05) (.85)
2006 15.98 1.01 (.25) (.21) -- .55 (.91) (.03) (.94)
2005 15.59 1.04 .50 (.12) -- 1.42 (.98) (.05) (1.03)
2004 14.82 1.05 .76 (.06) -- 1.75 (.98) -- (.98)
2003 15.24 1.06 (.47) (.07) -- .52 (.94) -- (.94)
====================================================================================================================================
Total Returns
----------------------
Offering Based
Costs and Ending on
Preferred Common Based Common
Share Share Ending on Share Net
Underwriting Asset Market Market Asset
Discounts Value Value Value* Value*
====================================================================================
CALIFORNIA PREMIUM
INCOME (NCU)
------------------------------------------------------------------------------------
Year Ended 8/31:
2007 $ -- $14.06 $13.03 (2.21)% .82%
2006 -- 14.63 14.01 3.14 2.72
2005 -- 15.03 14.37 11.76 9.75
2004 -- 14.51 13.67 12.04 12.94
2003 -- 13.66 13.02 (.91) .69
CALIFORNIA DIVIDEND
ADVANTAGE (NAC)
------------------------------------------------------------------------------------
Year Ended 8/31:
2007 -- 14.93 14.34 (5.19) 1.16
2006 -- 15.59 15.97 5.47 3.63
2005 -- 15.98 16.07 14.62 9.41
2004 -- 15.59 15.00 12.07 12.11
2003 -- 14.82 14.30 4.79 3.37
====================================================================================
Ratios/Supplemental Data
--------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets Ratios to Average Net Assets
Applicable to Common Shares Applicable to Common Shares
Before Credit/Reimbursement After Credit/Reimbursement**
-------------------------------------------- --------------------------------------------
Ending
Net
Assets
Applicable Expenses Expenses Net Expenses Expenses Net Portfolio
to Common Including Excluding Investment Including Excluding Investment Turnover
Shares (000) Interest++(a) Interest++(a) Income++ Interest++(a) Interest++(a) Income++ Rate
====================================================================================================================================
CALIFORNIA PREMIUM
INCOME (NCU)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2007 $ 81,200 1.29% 1.21% 6.14% 1.27% 1.19% 6.16% 11%
2006 84,467 1.23 1.23 6.09 1.21 1.21 6.10 20
2005 86,785 1.21 1.21 6.08 1.20 1.20 6.09 13
2004 83,772 1.23 1.23 6.62 1.22 1.22 6.63 19
2003 78,859 1.24 1.24 6.72 1.24 1.24 6.72 24
CALIFORNIA DIVIDEND
ADVANTAGE (NAC)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2007 350,523 1.17 1.12 6.24 .94 .89 6.47 20
2006 365,516 1.13 1.13 6.22 .83 .83 6.51 13
2005 374,265 1.12 1.12 6.22 .75 .75 6.59 4
2004 365,066 1.14 1.14 6.38 .70 .70 6.83 12
2003 346,918 1.15 1.15 6.44 .70 .70 6.88 11
====================================================================================================================================
Floating Rate Obligations
Preferred Shares at End of Period at End of Period
-------------------------------------- -------------------------
Aggregate Liquidation Aggregate
Amount and Market Asset Amount Asset
Outstanding Value Coverage Outstanding Coverage
(000) Per Share Per Share (000) Per $1,000
================================================================================
CALIFORNIA PREMIUM INCOME (NCU)
--------------------------------------------------------------------------------
Year Ended 8/31:
2007 $ 43,000 $25,000 $72,209 $2,352 $53,806
2006 43,000 25,000 74,109 -- --
2005 43,000 25,000 75,456 -- --
2004 43,000 25,000 73,704 -- --
2003 43,000 25,000 70,848 -- --
CALIFORNIA DIVIDEND ADVANTAGE (NAC)
--------------------------------------------------------------------------------
Year Ended 8/31:
2007 175,000 25,000 75,075 9,928 53,933
2006 175,000 25,000 77,217 -- --
2005 175,000 25,000 78,466 -- --
2004 175,000 25,000 77,152 -- --
2003 175,000 25,000 74,560 -- --
================================================================================
* Total Return on Market Value is the combination of changes in the market
price per share and the effect of reinvested dividend income and reinvested
capital gains distributions, if any, at the average price paid per share at
the time of reinvestment. The last dividend declared in the period, which
is typically paid on the first business day of the following month, is
assumed to be reinvested at the ending market price. The actual
reinvestment for the last dividend declared in the period takes place over
several days, and in some instances may not be based on the market price,
so the actual reinvestment price may be different from the price used in
the calculation. Total returns are not annualized.
Total Return on Common Share Net Asset Value is the combination of changes
in Common share net asset value, reinvested dividend income at net asset
value and reinvested capital gains distributions at net asset value, if
any. The last dividend declared in the period, which is typically paid on
the first business day of the following month, is assumed to be reinvested
at the ending net asset value. The actual reinvest price for the last
dividend declared in the period may often be based on the Fund's market
price (and not its net asset value), and therefore may be different from
the price used in the calculation. Total returns are not annualized.
** After custodian fee credit and expense reimbursement, where applicable.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders; income ratios reflect income earned on assets attributable to
Preferred shares.
(a) Interest expense arises from the application of SFAS No. 140 to certain
inverse floating rate transactions entered into by the Fund as more fully
described in Footnote 1 - Inverse Floating Rate Securities.
See accompanying notes to financial statements.
90-91 spread
Financial
HIGHLIGHTS (continued)
Selected data for a Common share outstanding throughout each period:
Investment Operations Less Distributions
------------------------------------------------------------------- --------------------------------
Distributions Distributions
from Net from Net
Beginning Investment Capital Investment Capital
Common Net Income to Gains to Income to Gains to
Share Net Realized/ Preferred Preferred Common Common
Net Asset Investment Unrealized Share- Share- Share- Share-
Value Income Gain (Loss) holders+ holders+ Total holders holders Total
====================================================================================================================================
CALIFORNIA DIVIDEND
ADVANTAGE 2 (NVX)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2007 $15.36 $ .96 $(.62) $(.25) $ -- $ .09 $(.76) $ -- $(.76)
2006 15.63 .97 (.19) (.21) -- .57 (.84) -- (.84)
2005 14.97 .98 .71 (.12) -- 1.57 (.91) -- (.91)
2004 14.18 .99 .77 (.06) -- 1.70 (.91) -- (.91)
2003 14.79 1.00 (.62) (.07) -- .31 (.89) (.03) (.92)
CALIFORNIA DIVIDEND
ADVANTAGE 3 (NZH)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2007 15.03 .98 (.73) (.27) -- (.02) (.76) -- (.76)
2006 15.31 .97 (.20) (.22) -- .55 (.83) -- (.83)
2005 14.65 .97 .68 (.13) -- 1.52 (.86) -- (.86)
2004 13.72 .98 .88 (.07) -- 1.79 (.86) -- (.86)
2003 14.33 .98 (.66) (.08) -- .24 (.86) -- (.86)
====================================================================================================================================
Total Returns
----------------------
Offering Based
Costs and Ending on
Preferred Common Based Common
Share Share Ending on Share Net
Underwriting Asset Market Market Asset
Discounts Value Value Value* Value*
======================================================================================
CALIFORNIA DIVIDEND
ADVANTAGE 2 (NVX)
--------------------------------------------------------------------------------------
Year Ended 8/31:
2007 $ -- $14.69 $13.73 (3.39)% .46%
2006 -- 15.36 14.95 4.19 3.82
2005 -- 15.63 15.19 14.98 10.80
2004 -- 14.97 14.08 13.60 12.11
2003 -- 14.18 13.24 (.95) 2.16
CALIFORNIA DIVIDEND
ADVANTAGE 3 (NZH)
--------------------------------------------------------------------------------------
Year Ended 8/31:
2007 -- 14.25 13.52 (4.12) (.32)
2006 -- 15.03 14.84 8.50 3.81
2005 -- 15.31 14.49 15.75 10.69
2004 -- 14.65 13.33 11.97 13.36
2003 .01 13.72 12.71 (3.20) 1.68
======================================================================================
Ratios/Supplemental Data
--------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets Ratios to Average Net Assets
Applicable to Common Shares Applicable to Common Shares
Before Credit/Reimbursement After Credit/Reimbursement**
-------------------------------------------- --------------------------------------------
Ending
Net
Assets
Applicable Expenses Expenses Net Expenses Expenses Net Portfolio
to Common Including Excluding Investment Including Excluding Investment Turnover
Shares (000) Interest++(a) Interest++(a) Income++ Interest++(a) Interest++(a) Income++ Rate
====================================================================================================================================
CALIFORNIA DIVIDEND
ADVANTAGE 2 (NVX)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2007 $217,332 1.25% 1.17% 5.97% .89% .81% 6.33% 21%
2006 227,160 1.16 1.16 5.94 .73 .73 6.36 9
2005 231,140 1.16 1.16 5.94 .70 .70 6.40 3
2004 221,395 1.18 1.18 6.24 .72 .72 6.70 13
2003 209,722 1.18 1.18 6.30 .73 .73 6.75 40
CALIFORNIA DIVIDEND
ADVANTAGE 3 (NZH)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2007 343,806 1.22 1.16 6.16 .81 .76 6.56 23
2006 362,473 1.16 1.16 6.08 .70 .70 6.54 10
2005 369,262 1.17 1.17 6.05 .70 .70 6.51 5
2004 353,360 1.20 1.20 6.32 .73 .73 6.78 13
2003 330,829 1.20 1.20 6.33 .73 .73 6.79 48
====================================================================================================================================
Floating Rate Obligations
Preferred Shares at End of Period at End of Period
-------------------------------------- -------------------------
Aggregate Liquidation Aggregate
Amount and Market Asset Amount Asset
Outstanding Value Coverage Outstanding Coverage
(000) Per Share Per Share (000) Per $1,000
================================================================================
CALIFORNIA DIVIDEND ADVANTAGE 2 (NVX)
--------------------------------------------------------------------------------
Year Ended 8/31:
2007 $110,000 $25,000 $74,394 $6,171 $54,044
2006 110,000 25,000 76,627 -- --
2005 110,000 25,000 77,532 -- --
2004 110,000 25,000 75,317 -- --
2003 110,000 25,000 72,664 -- --
CALIFORNIA DIVIDEND ADVANTAGE (NZH)
--------------------------------------------------------------------------------
Year Ended 8/31:
2007 187,000 25,000 70,963 7,930 67,936
2006 187,000 25,000 73,459 -- --
2005 187,000 25,000 74,367 -- --
2004 187,000 25,000 72,241 -- --
2003 187,000 25,000 69,229 -- --
================================================================================
* Total Return on Market Value is the combination of changes in the market
price per share and the effect of reinvested dividend income and reinvested
capital gains distributions, if any, at the average price paid per share at
the time of reinvestment. The last dividend declared in the period, which
is typically paid on the first business day of the following month, is
assumed to be reinvested at the ending market price. The actual
reinvestment for the last dividend declared in the period takes place over
several days, and in some instances may not be based on the market price,
so the actual reinvestment price may be different from the price used in
the calculation. Total returns are not annualized.
Total Return on Common Share Net Asset Value is the combination of changes
in Common share net asset value, reinvested dividend income at net asset
value and reinvested capital gains distributions at net asset value, if
any. The last dividend declared in the period, which is typically paid on
the first business day of the following month, is assumed to be reinvested
at the ending net asset value. The actual reinvest price for the last
dividend declared in the period may often be based on the Fund's market
price (and not its net asset value), and therefore may be different from
the price used in the calculation. Total returns are not annualized.
** After custodian fee credit and expense reimbursement, where applicable.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders; income ratios reflect income earned on assets attributable to
Preferred shares.
(a) Interest expense arises from the application of SFAS No. 140 to certain
inverse floating rate transactions entered into by the Fund as more fully
described in Footnote 1 - Inverse Floating Rate Securities.
See accompanying notes to financial statements.
92-93 spread
Financial
HIGHLIGHTS (continued)
Selected data for a Common share outstanding throughout each period:
Investment Operations Less Distributions
------------------------------------------------------------------- -----------------------------------
Distributions Distributions
from Net from Net
Beginning Investment Capital Investment Capital
Common Net Income to Gains to Income to Gains to
Share Net Realized/ Preferred Preferred Common Common
Net Asset Investment Unrealized Share- Share- Share- Share-
Value Income Gain (Loss) holders+ holders+ Total holders holders Total
====================================================================================================================================
INSURED CALIFORNIA
DIVIDEND ADVANTAGE (NKL)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2007 $15.50 $1.01 $(.57) $(.26) $ --**** $ .18 $(.77) $ --**** $ (.77)
2006 15.81 1.01 (.25) (.22) -- .54 (.85) -- (.85)
2005 15.35 1.01 .52 (.12) -- 1.41 (.90) (.05) (.95)
2004 14.60 1.02 .84 (.06) (.01) 1.79 (.91) (.13) (1.04)
2003 15.14 .99 (.49) (.07) (.01) .42 (.91) (.05) (.96)
INSURED CALIFORNIA
TAX-FREE ADVANTAGE (NKX)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2007 14.92 .96 (.46) (.24) -- .26 (.71) -- (.71)
2006 15.17 .95 (.25) (.21) -- .49 (.74) -- (.74)
2005 14.62 .96 .57 (.13) -- 1.40 (.85) -- (.85)
2004 13.79 .96 .84 (.06) -- 1.74 (.91) -- (.91)
2003(b) 14.33 .64 (.33) (.04) -- .27 (.60) -- (.60)
====================================================================================================================================
Total Returns
----------------------
Offering Based
Costs and Ending on
Preferred Common Based Common
Share Share Ending on Share Net
Underwriting Asset Market Market Asset
Discounts Value Value Value** Value**
=====================================================================================
INSURED CALIFORNIA
DIVIDEND ADVANTAGE (NKL)
-------------------------------------------------------------------------------------
Year Ended 8/31:
2007 $ -- $14.91 $14.24 (4.64)% 1.13%
2006 -- 15.50 15.70 10.72 3.62
2005 -- 15.81 15.00 9.00 9.46
2004 -- 15.35 14.67 12.54 12.53
2003 -- 14.60 14.00 (.35) 2.70
INSURED CALIFORNIA
TAX-FREE ADVANTAGE (NKX)
-------------------------------------------------------------------------------------
Year Ended 8/31:
2007 -- 14.47 14.47 6.35 1.69
2006 -- 14.92 14.27 4.56 3.43
2005 -- 15.17 14.38 7.46 9.84
2004 -- 14.62 14.19 11.54 12.86
2003(b) (.21) 13.79 13.56 (5.79) .34
=====================================================================================
Ratios/Supplemental Data
------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets Ratios to Average Net Assets
Applicable to Common Shares Applicable to Common Shares
Before Credit/Reimbursement After Credit/Reimbursement**
-------------------------------------------- -------------------------------------------
Ending
Net
Assets
Applicable Expenses Expenses Net Expenses Expenses Net Portfolio
to Common Including Excluding Investment Including Excluding Investment Turnover
Shares (000) Interest++(a) Interest++(a) Income++ Interest++(a) Interest++(a) Income++ Rate
====================================================================================================================================
INSURED CALIFORNIA
DIVIDEND ADVANTAGE (NKL)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2007 $227,923 1.21% 1.16% 6.12% .78% .73% 6.55% 12%
2006 236,525 1.17 1.17 6.12 .71 .71 6.58 3
2005 241,254 1.16 1.16 6.06 .71 .71 6.51 4
2004 234,186 1.18 1.18 6.28 .72 .72 6.74 14
2003 222,751 1.18 1.18 6.00 .72 .72 6.46 71
INSURED CALIFORNIA
TAX-FREE ADVANTAGE (NKX)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 8/31:
2007 85,144 1.27 1.21 5.95 .77 .71 6.45 15
2006 87,775 1.22 1.22 5.97 .73 .73 6.46 4
2005 89,272 1.21 1.21 5.95 .73 .73 6.43 3
2004 86,008 1.23 1.23 6.17 .73 .73 6.67 20
2003(b) 81,141 1.14* 1.14* 5.25* .67* .67* 5.72* 45
====================================================================================================================================
Floating Rate Obligations
Preferred Shares at End of Period at End of Period
-------------------------------------- -------------------------
Aggregate Liquidation Aggregate
Amount and Market Asset Amount Asset
Outstanding Value Coverage Outstanding Coverage
(000) Per Share Per Share (000) Per $1,000
================================================================================
INSURED CALIFORNIA DIVIDEND ADVANTAGE (NKL)
--------------------------------------------------------------------------------
Year Ended 8/31:
2007 $118,000 $25,000 $73,289 $ -- $ --
2006 118,000 25,000 75,111 -- --
2005 118,000 25,000 76,113 -- --
2004 118,000 25,000 74,616 -- --
2003 118,000 25,000 72,193 -- --
INSURED CALIFORNIA TAX-FREE ADVANTAGE (NKX)
--------------------------------------------------------------------------------
Year Ended 8/31:
2007 45,000 25,000 72,302 -- --
2006 45,000 25,000 73,764 -- --
2005 45,000 25,000 74,595 -- --
2004 45,000 25,000 72,782 -- --
2003(b) 45,000 25,000 70,078 -- --
================================================================================
* Annualized.
** Total Return on Market Value is the combination of changes in the market
price per share and the effect of reinvested dividend income and reinvested
capital gains distributions, if any, at the average price paid per share at
the time of reinvestment. The last dividend declared in the period, which
is typically paid on the first business day of the following month, is
assumed to be reinvested at the ending market price. The actual
reinvestment for the last dividend declared in the period takes place over
several days, and in some instances may not be based on the market price,
so the actual reinvestment price may be different from the price used in
the calculation. Total returns are not annualized.
Total Return on Common Share Net Asset Value is the combination of changes
in Common share net asset value, reinvested dividend income at net asset
value and reinvested capital gains distributions at net asset value, if
any. The last dividend declared in the period, which is typically paid on
the first business day of the following month, is assumed to be reinvested
at the ending net asset value. The actual reinvest price for the last
dividend declared in the period may often be based on the Fund's market
price (and not its net asset value), and therefore may be different from
the price used in the calculation. Total returns are not annualized.
*** After custodian fee credit and expense reimbursement, where applicable.
**** Per share Distributions from Capital Gains to Preferred Shareholders and
Capital Gains to Common Shareholders round to less than $.01 per share.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders; income ratios reflect income earned on assets attributable to
Preferred shares.
(a) Interest expense arises from the application of SFAS No. 140 to certain
inverse floating rate transactions entered into by the Fund as more fully
described in Footnote 1 - Inverse Floating Rate Securities.
(b) For the period November 21, 2002 (commencement of operations) through
August 31, 2003.
See accompanying notes to financial statements.
94-95 spread
Board Members & Officers
The management of the Funds, including general supervision of the duties
performed for the Funds by the Adviser, is the responsibility of the Board
Members of the Funds. The number of board members of the Fund is currently set
at eight. None of the board members who are not "interested" persons of the
Funds has ever been a director or employee of, or consultant to, Nuveen or its
affiliates. The names and business addresses of the board members and officers
of the Funds, their principal occupations and other affiliations during the past
five years, the number of portfolios each oversees and other directorships they
hold are set forth below.
NAME, POSITION(S) HELD YEAR FIRST NUMBER PRINCIPAL
BIRTHDATE WITH THE FUNDS ELECTED OR OF PORTFOLIOS OCCUPATION(S)
& ADDRESS APPOINTED IN FUND COMPLEX INCLUDING OTHER
AND TERM(2) OVERSEEN BY DIRECTORSHIPS
BOARD MEMBER DURING PAST 5 YEARS
BOARD MEMBER WHO IS AN INTERESTED PERSON OF THE FUNDS:
[] TIMOTHY R. SCHWERTFEGER(1) Director (since 1994) and Chairman (since
3/28/49 Chairman of 1994 1996) and Non-Executive Chairman (since July
333 W. Wacker Drive the Board ANNUAL 177 1, 2007) formerly, Chief Executive Officer
Chicago, IL 60606 and Board Member (1996-June 30, 2007) of Nuveen Investments,
Inc. and Nuveen Asset Management and certain
other subsidiaries of Nuveen Investments,
Inc.; formerly, Director (1992-2006) of
Institutional Capital Corporation.
BOARD MEMBERS WHO ARE NOT INTERESTED PERSONS OF THE FUNDS:
[] ROBERT P. BREMNER Private Investor and Management Consultant.
8/22/40 Lead 1997
333 W. Wacker Drive Independent CLASS III 177
Chicago, IL 60606 Board member
[] JACK B. EVANS President, The Hall-Perrine Foundation, a
10/22/48 1999 private philanthropic corporation (since
333 W. Wacker Drive Board member CLASS III 177 1996); Director and Vice Chairman, United
Chicago, IL 60606 Fire Group, a publicly held company; Member
of the Board of Regents for the State of
Iowa University System; Director, Gazette
Companies; Life Trustee of Coe College and
Iowa College Foundation; Member of the
Advisory Council of the Department of
Finance in the Tippie College of Business,
University of Iowa; formerly, Director,
Alliant Energy; formerly, Director, Federal
Reserve Bank of Chicago; formerly, President
and Chief Operating Officer, SCI Financial
Group, Inc., a regional financial services
firm.
[] WILLIAM C. HUNTER Dean, Tippie College of Business, University
3/6/48 2004 of Iowa (since July 2006); formerly, Dean
333 W. Wacker Drive Board member CLASS II 177 and Distinguished Professor of Finance,
Chicago, IL 60606 School of Business at the University of
Connecticut (2003-2006); previously, Senior
Vice President and Director of Research at
the Federal Reserve Bank of Chicago
(1995-2003); Director (since 1997), Credit
Research Center at Georgetown University;
Director (since 2004) of Xerox Corporation;
Director, SS&C Technologies, Inc. (May
2005-October 2005).
96
NAME, POSITION(S) HELD YEAR FIRST NUMBER PRINCIPAL
BIRTHDATE WITH THE FUNDS ELECTED OR OF PORTFOLIOS OCCUPATION(S)
& ADDRESS APPOINTED IN FUND COMPLEX INCLUDING OTHER
AND TERM(2) OVERSEEN BY DIRECTORSHIPS
BOARD MEMBER DURING PAST 5 YEARS
BOARD MEMBERS WHO ARE NOT INTERESTED PERSONS OF THE FUNDS:
[] DAVID J. KUNDERT Director, Northwestern Mutual Wealth
10/28/42 2005 Management Company; Retired (since 2004) as
333 W. Wacker Drive Board member CLASS II 177 Chairman, JPMorgan Fleming Asset Management,
Chicago, IL 60606 President and CEO, Banc One Investment
Advisors Corporation, and President, One
Group Mutual Funds; prior thereto, Executive
Vice President, Banc One Corporation and
Chairman and CEO, Banc One Investment
Management Group; Board of Regents, Luther
College; member of the Wisconsin Bar
Association; member of Board of Directors,
Friends of Boerner Botanical Gardens; member
of Board of Directors, Milwaukee Repertory
Theater.
[] WILLIAM J. SCHNEIDER Chairman of Miller-Valentine Partners Ltd.,
9/24/44 1997 a real estate investment company; formerly,
333 W. Wacker Drive Board member ANNUAL 177 Senior Partner and Chief Operating Officer
Chicago, IL 60606 (retired, 2004) of Miller-Valentine Group;
formerly, Vice President, Miller-Valentine
Realty; Board Member, Chair of the Finance
Committee and member of the Audit Committee
of Premier Health Partners, the
not-for-profit company of Miami Valley
Hospital; Vice President, Dayton
Philharmonic Orchestra Association; Board
Member, Regional Leaders Forum, which
promotes cooperation on economic development
issues; Director, Dayton Development
Coalition; formerly, Member, Community
Advisory Board, National City Bank, Dayton,
Ohio and Business Advisory Council,
Cleveland Federal Reserve Bank.
[] JUDITH M. STOCKDALE Executive Director, Gaylord and Dorothy
12/29/47 1997 Donnelley Foundation (since 1994); prior
333 W. Wacker Drive Board member CLASS I 177 thereto, Executive Director, Great Lakes
Chicago, IL 60606 Protection Fund (from 1990 to 1994).
[] CAROLE E. STONE Director, Chicago Board Options Exchange
6/28/47 2007 (since 2006); Chair New York Racing
333 West Wacker Drive Board member CLASS I 177 Association Oversight Board (since 2005);
Chicago, IL 60606 Commissioner, New York State Commission on
Public Authority Reform (since 2005);
formerly Director, New York State Division
of the Budget (2000-2004), Chair, Public
Authorities Control Board (2000-2004) and
Director, Local Government Assistance
Corporation (2000-2004).
97
NAME, POSITION(S) HELD YEAR FIRST NUMBER PRINCIPAL
BIRTHDATE WITH THE FUNDS ELECTED OR OF PORTFOLIOS OCCUPATION(S)
AND ADDRESS APPOINTED(4) IN FUND COMPLEX DURING PAST 5 YEARS
OVERSEEN
BY OFFICER
OFFICERS OF THE FUND:
[] GIFFORD R. ZIMMERMAN Managing Director (since 2002), Assistant
9/9/56 Chief Secretary and Associate General Counsel,
333 W. Wacker Drive Administrative 1988 177 formerly, Vice President and Assistant
Chicago, IL 60606 Officer General Counsel, of Nuveen Investments, LLC;
Managing Director (since 2002), Associate
General Counsel and Assistant Secretary, of
Nuveen Asset Management; Vice President and
Assistant Secretary of NWQ Investment
Management Company, LLC. (since 2002),
Nuveen Investments Advisers Inc. (since
2002), Symphony Asset Management LLC, and
NWQ Investment Management Company, LLC
(since 2003), Tradewinds Global Investors,
LLC, and Santa Barbara Asset Management, LLC
(since 2006); Nuveen HydePark Group LLC and
Richards & Tierney, Inc. (since 2007);
Managing Director, Associate General Counsel
and Assistant Secretary of Rittenhouse Asset
Management, Inc. (since 2003); Managing
Director (since 2004) and Assistant
Secretary (since 1994) of Nuveen
Investments, Inc., Assistant Secretary
(since 2003) of Symphony Asset Management
LLC.
[] WILLIAMS ADAMS IV Executive Vice President, U.S. Structured
6/9/55 Products of Nuveen Investments, LLC, (since
333 West Wacker Drive Vice President 2007 119 1999), prior thereto, Managing Director of
Chicago, IL 60606 Structured Investments.
[] JULIA L. ANTONATOS Managing Director (since 2005), formerly
9/22/63 Vice President (since 2002) of Nuveen
333 W. Wacker Drive Vice President 2004 177 Investments, LLC; Chartered Financial
Chicago, IL 60606 Analyst.
[] CEDRIC H. ANTOSIEWICZ Managing Director, (since 2004) previously,
1/11/62 Vice President (1993-2004) of Nuveen
333 W. Wacker Drive Vice President 2007 119 Investments, LLC.
Chicago, IL 60606
[] MICHAEL T. ATKINSON Vice President (since 2002) of Nuveen
2/3/66 Vice President Investments, LLC.
333 W. Wacker Drive and Assistant 2000 177
Chicago, IL 60606 Secretary
[] PETER H. D'ARRIGO Vice President and Treasurer of Nuveen
11/28/67 Investments, LLC and Nuveen Investments,
333 W. Wacker Drive Vice President 1999 177 Inc.; Vice President and Treasurer of Nuveen
Chicago, IL 60606 Asset Management (since 2002), Nuveen
Investments Advisers Inc. (since 2002); NWQ
Investment Management Company, LLC. (since
2002); Rittenhouse Asset Management, Inc.
(since 2003), Tradewinds NWQ Global
Investors, LLC (since 2006), Santa Barbara
Asset Management, LLC (since 2006) and
Nuveen HydePark Group, LLC and Richards
&Tierney, Inc. (since 2007); Treasurer of
Symphony Asset Management LLC (since 2003);
formerly, Vice President and Treasurer
(1999-2004) of Nuveen Advisory Corp. and
Nuveen Institutional Advisory Corp.(3),
Chartered Financial Analyst.
[] LORNA C. FERGUSON Managing Director (since 2004), formerly,
10/24/45 Vice President of Nuveen Investments, LLC,
333 W. Wacker Drive Vice President 1998 177 Managing Director (2004) formerly, Vice
Chicago, IL 60606 President (1998-2004) of Nuveen Advisory
Corp. and Nuveen Institutional Advisory
Corp.(3); Managing Director (since 2005) of
Nuveen Asset Management.
[] WILLIAM M. FITZGERALD Managing Director (since 2002), formerly,
3/2/64 Vice President of Nuveen Investments, LLC;
333 W. Wacker Drive Vice President 1995 177 Managing Director (1997-2004) of Nuveen
Chicago, IL 60606 Advisory Corp. and Nuveen Institutional
Advisory Corp.(3); Managing Director (since
2001) of Nuveen Asset Management; Vice
President (since 2002) of Nuveen Investments
Advisers Inc.; Chartered Financial Analyst.
98
NAME, POSITION(S) HELD YEAR FIRST NUMBER PRINCIPAL
BIRTHDATE WITH THE FUNDS ELECTED OR OF PORTFOLIOS OCCUPATION(S)
AND ADDRESS APPOINTED(4) IN FUND COMPLEX DURING PAST 5 YEARS
OVERSEEN
BY OFFICER
OFFICERS OF THE FUND:
[] STEPHEN D. FOY Vice President (since 1993) and Funds
5/31/54 Vice President Controller (since 1998) of Nuveen
333 W. Wacker Drive and Controller 1998 177 Investments, LLC; formerly, Vice President
Chicago, IL 60606 and Funds Controller (1998-2004) of Nuveen
Investments, Inc.; Certified Public
Accountant.
[] WALTER M. KELLY Vice President (since 2006) formerly,
2/24/70 Chief Compliance Assistant Vice President and Assistant
333 West Wacker Drive Officer and 2003 177 General Counsel (2003-2006) of Nuveen
Chicago, IL 60606 Vice President Investments, LLC; Assistant Vice President
and Assistant Secretary of the Nuveen Funds
(2003-2006); previously, Associate
(2001-2003) at the law firm of Vedder,
Price, Kaufman & Kammholz.
[] DAVID J. LAMB Vice President (since 2000) of Nuveen
3/22/63 Investments, LLC; Certified Public
333 W. Wacker Drive Vice President 2000 177 Accountant.
Chicago, IL 60606
[] TINA M. LAZAR Vice President of Nuveen Investments, LLC
(since 1999).
8/27/61
333 W. Wacker Drive Vice President 2002 177
Chicago, IL 60606
[] LARRY W. MARTIN Vice President, Assistant Secretary and
7/27/51 Vice President Assistant General Counsel of Nuveen
333 W. Wacker Drive and Assistant 1988 177 Investments, LLC; formerly, Vice President
Chicago, IL 60606 Secretary and Assistant Secretary of Nuveen Advisory
Corp. and Nuveen Institutional Advisory
Corp.(3); Vice President (since 2005) and
Assistant Secretary of Nuveen Investments,
Inc.; Vice President (since 2005) and
Assistant Secretary (since 1997) of Nuveen
Asset Management; Vice President (since
2000), Assistant Secretary and Assistant
General Counsel (since 1998) of Rittenhouse
Asset Management, Inc.; Vice President and
Assistant Secretary of Nuveen Investments
Advisers Inc. (since 2002); NWQ Investment
Management Company, LLC (since 2002),
Symphony Asset Management LLC (since 2003),
Tradewinds NWQ Global Investors, LLC, Santa
Barbara Asset Management LLC (since 2006)
and of Nuveen HydePark Group, LLC and
Richards &Tierney, Inc. (since 2007).
[] KEVIN J. MCCARTHY Vice President, Nuveen Investments, LLC
3/26/66 Vice President (since 2007); Vice President, and Assistant
333 W. Wacker Drive and Secretary 2007 177 Secretary, Nuveen Asset Management,
Chicago, IL 60606 Rittenhouse Asset Management, Inc., Nuveen
Investment Advisers Inc., Nuveen Investment
Institutional Services Group LLC, NWQ
Investment Management Company, LLC,
Tradewinds Global Investors LLC,
NWQHoldings, LLC, Symphony Asset Management
LLC, Santa Barbara Asset Management LLC,
Nuveen HydePark Group, LLC and Richards
&Tierney, Inc. (since 2007); Vice President
and Assistant General Counsel, Nuveen
Investments, Inc. (since 2007). prior
thereto, Partner, Bell, Boyd & Lloyd LLP
(1997-2007)
[] JOHN V. MILLER Managing Director (since 2007), formerly,
4/10/67 Vice President (2002-2007) of Nuveen
333 W. Wacker Drive Vice President 2007 177 Investments, LLC; Chartered Financial
Chicago, IL 60606 Analyst.
(1) Mr. Schwertfeger is an "interested person" of the Funds, as defined in the
Investment Company Act of 1940, by reason of being Non-Executive Chairman
of Nuveen Investments, Inc. and having previously served in various other
capacities with Nuveen Investments, Inc. and its subsidiaries.
(2) Board Members serve three year terms, except for two board members who are
elected by the holders of Preferred Shares. The Board of Trustees is
divided into three classes, Class I, Class II, and Class III, with each
being elected to serve until the third succeeding annual shareholders'
meeting subsequent to its election or thereafter in each case when its
respective successors are duly elected or appointed, except two board
members are elected by the holders of Preferred Shares to serve until the
next annual shareholders' meeting subsequent to its election or thereafter
in each case when its respective successors are duly elected or appointed.
The first year elected or appointed represents the year in which the board
member was first elected or appointed to any fund in the Nuveen Complex.
(3) Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp. were
reorganized into Nuveen Asset Management, effective January 1, 2005.
(4) Officers serve one year terms through July of each year. The year first
elected or appointed represents the year in which the Officer was first
elected or appointed to any fund in the Nuveen Complex.
99
Annual Investment
Management Agreement
APPROVAL PROCESS
The Board Members are responsible for overseeing the performance of the
investment adviser to the Funds and determining whether to continue the advisory
arrangements. At the annual review meeting held on May 21, 2007 (the "May
Meeting"), the Board Members of the Funds, including the Independent Board
Members, unanimously approved the continuance of the Investment Management
Agreement between each Fund (each, a "Fund") and Nuveen Asset Management
("NAM"). The foregoing Investment Management Agreements with NAM are hereafter
referred to as "Original Investment Management Agreements."
Subsequent to the May Meeting, Nuveen Investments, Inc. ("Nuveen"), the parent
company of NAM, entered into a merger agreement providing for the acquisition of
Nuveen by Windy City Investments, Inc., a corporation formed by investors led by
Madison Dearborn Partners, LLC ("MDP"), a private equity investment firm (the
"Transaction"). Each Original Investment Management Agreement, as required by
Section 15 of the Investment Company Act of 1940 (the "1940 Act"), provides for
its automatic termination in the event of its "assignment" (as defined in the
1940 Act). Any change in control of the adviser is deemed to be an assignment.
The consummation of the Transaction will result in a change of control of NAM as
well as its affiliated sub-advisers and therefore cause the automatic
termination of each Original Investment Management Agreement, as required by the
1940 Act. Accordingly, in anticipation of the Transaction, at a meeting held on
July 31, 2007 (the "July Meeting"), the Board Members, including the Independent
Board Members, unanimously approved new Investment Management Agreements (the
"New Investment Management Agreements") with NAM on behalf of each Fund to take
effect immediately after the Transaction or shareholder approval of the new
advisory contracts, whichever is later. The 1940 Act also requires that each New
Investment Management Agreement be approved by the respective Fund's
shareholders in order for it to become effective. Accordingly, to ensure
continuity of advisory services, the Board Members, including the Independent
Board Members, unanimously approved Interim Investment Management Agreements to
take effect upon the closing of the Transaction if shareholders have not yet
approved the New Investment Management Agreements.
Because the information provided and considerations made at the annual review
continue to be relevant with respect to the evaluation of the New Investment
Management Agreements, the Board considered the foregoing as part of its
deliberations of the New Investment Management Agreements. Accordingly, as
indicated, the discussions immediately below outline the materials and
information presented to the Board in connection with the Board's prior annual
review and the analysis undertaken and the conclusions reached by Board Members
when determining to continue the Original Investment Management Agreements.
I. APPROVAL OF THE ORIGINAL INVESTMENT MANAGEMENT AGREEMENTS
During the course of the year, the Board received a wide variety of materials
relating to the services provided by NAM and the performance of the Funds. At
each of its quarterly meetings, the Board reviewed investment performance and
various matters relating to the operations of the Funds and other Nuveen funds,
including the compliance program, shareholder services, valuation, custody,
distribution and other information relating to the nature, extent and quality of
services provided by NAM. Between the regularly scheduled quarterly meetings,
the Board Members received information on particular matters as the need arose.
In preparation for their considerations at the May Meeting, the Independent
Board Members received extensive materials, well in advance of the meeting,
which outlined or are related to, among other things:
[] the nature, extent and quality of services provided by NAM;
[] the organization and business operations of NAM, including the
responsibilities of various departments and key personnel;
100
[] each Fund's past performance as well as the Fund's performance compared to
funds with similar investment objectives based on data and information
provided by an independent third party and to customized benchmarks;
[] the profitability of Nuveen and certain industry profitability analyses for
unaffiliated advisers;
[] the expenses of Nuveen in providing the various services;
[] the advisory fees and total expense ratios of each Fund, including
comparisons of such fees and expenses with those of comparable,
unaffiliated funds based on information and data provided by an independent
third party (the "Peer Universe") as well as compared to a subset of funds
within the Peer Universe (the "Peer Group") of the respective Fund (as
applicable);
[] the advisory fees NAM assesses to other types of investment products or
clients;
[] the soft dollar practices of NAM, if any; and
[] from independent legal counsel, a legal memorandum describing among other
things, applicable laws, regulations and duties in reviewing and approving
advisory contracts.
At the May Meeting, NAM made a presentation to, and responded to questions from,
the Board. Prior to and after the presentations and reviewing the written
materials, the Independent Board Members met privately with their legal counsel
to review the Boardduties in reviewing advisory contracts and considering the
renewal of the advisory contracts. The Independent Board Members, in
consultation with independent counsel, reviewed the factors set out in judicial
decisions and Securities and Exchange Commission ("SEC") directives relating to
the renewal of advisory contracts. As outlined in more detail below, the Board
Members considered all factors they believed relevant with respect to each Fund,
including, but not limited to, the following: (a) the nature, extent and quality
of the services to be provided by NAM; (b) the investment performance of the
Fund and NAM; (c) the costs of the services to be provided and profits to be
realized by Nuveen and its affiliates; (d) the extent to which economies of
scale would be realized; and (e) whether fee levels reflect those economies of
scale for the benefit of the Fund's investors. In addition, as noted, the Board
Members met regularly throughout the year to oversee the Funds. In evaluating
the Original Investment Management Agreements, the Board Members also relied
upon their knowledge of NAM, its services and the Funds resulting from their
meetings and other interactions throughout the year. It is with this background
that the Board Members considered each Original Investment Management Agreement.
A. NATURE, EXTENT AND QUALITY OF SERVICES
In considering the renewal of the Original Investment Management Agreements, the
Board Members considered the nature, extent and quality of NAM's services. The
Board Members reviewed materials outlining, among other things, Nuveen's
organization and business; the types of services that NAM or its affiliates
provide and are expected to provide to the Funds; the performance record of the
applicable Fund (as described in further detail below); and, any initiatives
Nuveen had taken for the municipal fund product line. As noted, at the annual
review, the Board Members were already familiar with the organization,
operations and personnel of NAM due to the Board Members' experience in
governing the respective Funds and working with NAM on matters relating to the
Funds. With respect to personnel, the Board Members recognized NAM's investment
in additional qualified personnel throughout the various groups in the
organization and recommended to NAM that it continue to review staffing needs as
necessary. In addition, the Board Members reviewed materials describing the
current status and, in particular, the developments in 2006 with respect to
NAM's investment process, investment strategies (including additional tools used
in executing such strategies), personnel (including portfolio management and
research teams), trading process, hedging activities, risk management operations
(e.g., reviewing credit quality, duration limits, and derivatives use, as
applicable), and investment operations (such as enhancements to trading
procedures, pricing procedures, and client services). The Board Members
recognized NAM's investment of resources and efforts to continue to enhance and
refine its investment process.
In addition to advisory services, the Independent Board Members considered the
quality of administrative and non-advisory services provided by NAM and noted
that NAM and its affiliates provide the Funds with a wide variety of services
and officers and other personnel as are necessary for the operations of the
Funds, including:
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ANNUAL INVESTMENT MANAGEMENT AGREEMENT
APPROVAL PROCESS (continued)
[] product management;
[] fund administration;
[] oversight by shareholder services and other fund service providers;
[] administration of Board relations;
[] regulatory and portfolio compliance; and
[] legal support.
As the Funds operate in a highly regulated industry and given the importance of
compliance, the Board Members considered, in particular, Nuveen's compliance
activities for the Funds and enhancements thereto. In this regard, the Board
Members recognized the quality of Nuveen's compliance team. The Board Members
further noted Nuveen's negotiations with other service providers and the
corresponding reduction in certain service providers' fees at the May Meeting.
In addition to the foregoing services, the Board Members also noted the
additional services that NAM or its affiliates provide to Nuveen's closed-end
funds, including, in particular, its secondary market support activities. The
Board Members recognized Nuveen's continued commitment to supporting the
secondary market for the common shares of its closed-end funds through a variety
of programs designed to raise investor and analyst awareness and understanding
of closed-end funds. These efforts include:
[] maintaining shareholder communications;
[] providing advertising for the Nuveen closed-end funds;
[] maintaining its closed-end fund website;
[] maintaining continual contact with financial advisers;
[] providing educational symposia;
[] conducting research with investors and financial analysis regarding
closed-end funds; and
[] evaluating secondary market performance.
With respect to the Nuveen closed-end funds that utilize leverage through the
issuance of preferred shares ("Preferred Shares"), the Board Members noted
Nuveen's continued support for the holders of Preferred Shares by, among other
things:
[] maintaining an in-house trading desk;
[] maintaining a product manager for the Preferred Shares;
[] developing distribution for Preferred Shares with new market participants;
[] maintaining an orderly auction process;
[] managing leverage and risk management of leverage; and
[] maintaining systems necessary to test compliance with rating agency
criteria.
Based on their review, the Board Members found that, overall, the nature, extent
and quality of services provided (and expected to be provided) to the respective
Funds under the Original Investment Management Agreements were satisfactory.
B. THE INVESTMENT PERFORMANCE OF THE FUNDS AND NAM
At the May Meeting, the Board considered the investment performance for each
Fund, including the Fund's historic performance as well as its performance
compared to funds with similar investment objectives (the "Performance Peer
Group") based on data provided by an independent third party (as described
below). The Board Members also reviewed the respective Fund's portfolio level
performance (which does not reflect fund level fees and expenses, and leverage)
against customized benchmarks, described in further detail below.
102
In evaluating the performance information during the annual review at the May
Meeting, in certain instances, the Board Members noted that the closest
Performance Peer Group for a fund may not adequately reflect such fund's
investment objectives and strategies, thereby limiting the usefulness of the
comparisons of such fund's performance with that of the Performance Peer Group.
With respect to state-specific municipal funds, the Board Members also
recognized that certain funds do not have a corresponding state-specific
Performance Peer Group in which case their performance is measured against a
more general municipal category for various states. With respect to municipal
closed-end funds, funds that do not have corresponding state-specific
Performance Peer Groups are from states other than New York, California,
Florida, New Jersey, Michigan and Pennsylvania. However, with respect to funds
based in Florida, New Jersey, Michigan and Pennsylvania, the peer group may be
so small or the Nuveen funds may dominate the category to such an extent that
performance information for such funds was also compared to the more general
category for all states (other than New York and California).
The Board Members reviewed performance information including, among other
things, total return information compared with the Fund's Performance Peer Group
for the one-, three- and five-year periods (as applicable) ending December 31,
2006. The Board Members also reviewed the Fund's portfolio level performance
(which does not reflect fund level fees and expenses, and leverage) compared to
customized portfolio level benchmarks for the one- and three-year periods ending
December 31, 2006 (as applicable). The analysis was used to assess the efficacy
of investment decisions against appropriate measures of risk and total return,
within specific market segments. This information supplemented the Fund
performance information provided to the Board at each of its quarterly meetings.
Based on their review, the Board Members determined that each Fund's investment
performance over time had been satisfactory, subject to the following. With
respect to various municipal closed-end funds, the Board Members noted relative
total return underperformance in recent years compared to peers. The Board
Members reviewed materials and discussed with NAM the factors contributing to
the shift in performance including, among other things, the degree of risk
undertaken by peers compared to the municipal closed-end funds (such as through
the increased use of leverage or taking concentrated positions in high risk
credits). In addition, the Board Members also considered a fund's dividend
performance and the extent of any secondary market discounts. The Board Members
noted NAM's efforts to evaluate the factors affecting performance and determine
whether modification to a fund's investment strategy is necessary or
appropriate, and concluded that they were satisfied with the steps being taken.
C. FEES, EXPENSES AND PROFITABILITY
1. FEES AND EXPENSES
During the annual review, in evaluating the management fees and expenses of
a Fund, the Board reviewed, among other things, the Fund's advisory fees
(net and gross management fees) and total expense ratios (before and after
expense reimbursements and/or waivers) in absolute terms as well as
comparisons to the gross management fees (before waivers), net management
fees (after waivers) and total expense ratios (before and after waivers) of
comparable funds in the Peer Universe and the Peer Group. In reviewing the
fee schedule for a Fund, the Board Members considered the fund-level and
complex-wide breakpoint schedules (described in further detail below) and
any fee waivers and reimbursements provided by Nuveen (applicable, in
particular, for certain funds launched since 1999). The Board Members
further reviewed data regarding the construction of Peer Groups as well as
the methods of measurement for the fee and expense analysis and the
performance analysis. In certain cases, due to the small number of peers in
the Peer Universe, the Peer Universe and Peer Group had significant overlap
or even consisted entirely of the same unaffiliated funds. In reviewing the
comparisons of fee and expense information, the Board Members recognized
that in certain cases, the fund size relative to peers, the small size and
odd composition of the Peer Group (including differences in objectives and
strategies), expense anomalies, timing of information used or other factors
impacting the comparisons thereby limited some of the usefulness of the
comparative data. The Board Members also considered the differences in the
use of leverage. Based on their review of the fee and expense information
provided, the Board Members determined that each Fund's net total expense
ratio was within an acceptable range compared to peers.
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ANNUAL INVESTMENT MANAGEMENT AGREEMENT
APPROVAL PROCESS (continued)
2. COMPARISONS WITH THE FEES OF OTHER CLIENTS
At the annual review, the Board Members further reviewed data comparing the
advisory fees of NAM with fees NAM charges to other clients. With respect
to municipal funds, such clients include NAM's municipal separately managed
accounts. In general, the advisory fees charged for separate accounts are
somewhat lower than the advisory fees assessed to the Funds. The Board
Members considered the differences in the product types, including, but not
limited to, the services provided, the structure and operations, product
distribution and costs thereof, portfolio investment policies, investor
profiles, account sizes and regulatory requirements. The Board Members
noted, in particular, that the range of services provided to the Funds (as
discussed above) is much more extensive than that provided to separately
managed accounts. As described in further detail above, such additional
services include, but are not limited to: product management, fund
administration, oversight of third party service providers, administration
of Board relations, and legal support. The Board Members noted that the
Funds operate in a highly regulated industry requiring extensive compliance
functions compared to other investment products. Given the inherent
differences in the products, particularly the extensive services provided
to the Funds, the Board Members believe such facts justify the different
levels of fees.
3. PROFITABILITY OF NUVEEN
In conjunction with its review of fees, the Board Members also considered
the profitability of Nuveen for its advisory activities (which incorporated
Nuveen's wholly-owned affiliated sub-advisers) and its financial condition.
At the annual review, the Board Members reviewed the revenues and expenses
of Nuveen's advisory activities for the last three years, the allocation
methodology used in preparing the profitability data as well as the 2006
Annual Report for Nuveen. The Board Members noted this information
supplemented the profitability information requested and received during
the year to help keep them apprised of developments affecting profitability
(such as changes in fee waivers and expense reimbursement commitments). In
this regard, the Board Members noted the enhanced dialogue and information
regarding profitability with NAM during the year, including more frequent
meetings and updates from Nuveen's corporate finance group. The Board
Members also reviewed data comparing Nuveen's profitability with other fund
sponsors prepared by three independent third party service providers as
well as comparisons of the revenues, expenses and profit margins of various
unaffiliated management firms with similar amounts of assets under
management prepared by Nuveen.
In reviewing profitability, the Board Members recognized the subjective
nature of determining profitability which may be affected by numerous
factors, including the allocation of expenses. Further, the Board Members
recognized the difficulties in making comparisons as the profitability of
other advisers generally is not publicly available and the profitability
information that is available for certain advisers or management firms may
not be representative of the industry and may be affected by, among other
things, the adviser's particular business mix, capital costs, types of
funds managed and expense allocations.
Notwithstanding the foregoing, the Board Members reviewed Nuveen's methodology
and assumptions for allocating expenses across product lines to determine
profitability. Last year, the Board Members also designated an Independent Board
Member as a point person for the Board to review the methodology determinations
during the year and any refinements thereto, which relevant information produced
from such process was reported to the full Board. In reviewing profitability,
the Board Members recognized Nuveen's increased investment in its fund business.
Based on its review, the Board Members concluded that Nuveen's level of
profitability for its advisory activities was reasonable in light of the
services provided.
In evaluating the reasonableness of the compensation, the Board Members also
considered other amounts paid to NAM by the Funds as well as any indirect
benefits (such as soft dollar arrangements, if any) NAM and its affiliates
receive, or are expected to receive, that are directly attributable to the
management of the Funds, if any. See Section E below for additional information
on indirect benefits NAM may receive as a result of its relationship with the
Funds. Based on their review of the overall fee arrangements of each Fund, the
Board Members determined that the advisory fees and expenses of the Funds were
reasonable.
104
D. ECONOMIES OF SCALE AND WHETHER FEE LEVELS REFLECT THESE ECONOMIES OF SCALE
With respect to economies of scale, the Board Members recognized the potential
benefits resulting from the costs of a Fund being spread over a larger asset
base. To help ensure the shareholders share in these benefits, the Board Members
reviewed and considered the breakpoints in the advisory fee schedules that
reduce advisory fees. In addition to advisory fee breakpoints, the Board also
approved a complex-wide fee arrangement in 2004. Pursuant to the complex-wide
fee arrangement, the fees of the funds in the Nuveen complex, including the
Funds, are reduced as the assets in the fund complex reach certain levels. In
evaluating the complex-wide fee arrangement, the Board Members noted that the
last complex-wide asset level breakpoint for the complex-wide fee schedule was
at $91 billion and that the Board Members anticipated further review and/or
negotiations prior to the assets of the Nuveen complex reaching such threshold.
Based on their review, the Board Members concluded that the breakpoint schedule
and complex-wide fee arrangement were acceptable and desirable in providing
benefits from economies of scale to shareholders, subject to further evaluation
of the complex-wide fee schedule as assets in the complex increase. See Section
II, Paragraph D - "Approval of the New Investment Management Agreements -
Economies of Scale and Whether Fee Levels Reflect These Economies of Scale" for
information regarding subsequent modifications to the complex-wide fee.
E. INDIRECT BENEFITS
In evaluating fees, the Board Members also considered any indirect benefits or
profits NAM or its affiliates may receive as a result of its relationship with
each Fund. With respect to closed-end funds, the Board Members considered the
revenues received by affiliates of NAM for serving as agent at Nuveen's
preferred trading desk and for serving as a co-manager in the initial public
offering of new closed-end exchange traded funds.
In addition to the above, the Board Members considered whether NAM received any
benefits from soft dollar arrangements whereby a portion of the commissions paid
by a Fund for brokerage may be used to acquire research that may be useful to
NAM in managing the assets of the Funds and other clients. With respect to NAM,
the Board Members noted that NAM does not currently have any soft dollar
arrangements; however, to the extent certain bona fide agency transactions that
occur on markets that traditionally trade on a principal basis and riskless
principal transactions are considered as generating "commissions," NAM intends
to comply with the applicable safe harbor provisions.
Based on their review, the Board Members concluded that any indirect benefits
received by NAM as a result of its relationship with the Funds were reasonable
and within acceptable parameters.
F. OTHER CONSIDERATIONS
The Board Members did not identify any single factor discussed previously as
all-important or controlling in their considerations to continue an advisory
contract. The Board Members, including the Independent Board Members,
unanimously concluded that the terms of the Original Investment Management
Agreements are fair and reasonable, that NAM's fees are reasonable in light of
the services provided to each Fund and that the renewal of the Original
Investment Management Agreements be approved.
II. APPROVAL OF THE NEW INVESTMENT MANAGEMENT AGREEMENTS
Following the May Meeting, the Board Members were advised of the potential
Transaction. As noted above, the completion of the Transaction would terminate
each of the Original Investment Management Agreements. Accordingly, at the July
Meeting, the Board of each Fund, including the Independent Board Members,
unanimously approved the New Investment Management Agreements on behalf of the
respective Funds. Leading up to the July Meeting, the Board Members had several
meetings and deliberations with and without Nuveen management present, and with
the advice of legal counsel, regarding the proposed Transaction as outlined
below.
On June 8, 2007, the Board Members held a special telephonic meeting to discuss
the proposed Transaction. At that meeting, the Board Members established a
special ad hoc committee comprised solely of Independent Board Members to focus
on the Transaction and to keep the Independent Board Members updated with
developments regarding the Transaction. On June 15, 2007, the ad hoc committee
discussed
105
ANNUAL INVESTMENT MANAGEMENT AGREEMENT
APPROVAL PROCESS (continued)
with representatives of NAM the Transaction and modifications to the
complex-wide fee schedule that would generate additional fee savings at
specified levels of complex-wide asset growth. Following the foregoing meetings
and several subsequent telephonic conferences among Independent Board Members
and independent counsel, and between Independent Board Members and
representatives of Nuveen, the Board met on June 18, 2007 to further discuss the
proposed Transaction. Immediately prior to and then again during the June 18,
2007 meeting, the Independent Board Members met privately with their independent
legal counsel. At that meeting, the Board met with representatives of MDP, of
Goldman Sachs, Nuveen's financial adviser in the Transaction, and of the Nuveen
Board to discuss, among other things, the history and structure of MDP, the
terms of the proposed Transaction (including the financing terms), and MDP's
general plans and intentions with respect to Nuveen (including with respect to
management, employees, and future growth prospects). On July 9, 2007, the Board
also met to be updated on the Transaction as part of a special telephonic Board
meeting. The Board Members were further updated at a special in-person Board
meeting held on July 19, 2007 (one Independent Board Member participated
telephonically). Subsequently, on July 27, 2007, the ad hoc committee held a
telephonic conference with representatives of Nuveen and MDP to further discuss,
among other things, the Transaction, the financing of the Transaction, retention
and incentive plans for key employees, the effect of regulatory restrictions on
transactions with affiliates after the Transaction, and current volatile market
conditions and their impact on the Transaction.
In connection with their review of the New Investment Management Agreements, the
Independent Board Members, through their independent legal counsel, also
requested in writing and received additional information regarding the proposed
Transaction and its impact on the provision of services by NAM and its
affiliates.
The Independent Board Members received, well in advance of the July Meeting,
materials which outlined, among other things:
[] the structure and terms of the Transaction, including MDP's co-investor
entities and their expected ownership interests, and the financing
arrangements that will exist for Nuveen following the closing of the
Transaction;
[] the strategic plan for Nuveen following the Transaction;
[] the governance structure for Nuveen following the Transaction;
[] any anticipated changes in the operations of the Nuveen funds following the
Transaction, including changes to NAM's and Nuveen's day-to-day management,
infrastructure and ability to provide advisory, distribution or other
applicable services to the Funds;
[] any changes to senior management or key personnel who work on Fund related
matters (including portfolio management, investment oversight, and
legal/compliance) and any retention or incentive arrangements for such
persons;
[] any anticipated effect on each Fund's expense ratio (including advisory
fees) following the Transaction;
[] any benefits or undue burdens imposed on the Funds as a result of the
Transaction;
[] any legal issues for the Funds as a result of the Transaction;
[] the nature, quality and extent of services expected to be provided to the
Funds following the Transaction, changes to any existing services and
policies affecting the Funds, and cost-cutting efforts, if any, that may
impact such services or policies;
[] any conflicts of interest that may arise for Nuveen or MDP with respect to
the Funds;
[] the costs associated with obtaining necessary shareholder approvals and who
would bear those costs; and
[] from legal counsel, a memorandum describing the applicable laws,
regulations and duties in approving advisory contracts, including, in
particular, with respect to a change of control.
106
Immediately preceding the July Meeting, representatives of MDP met with the
Board to further respond to questions regarding the Transaction. After the
meeting with MDP, the Independent Board Members met with independent legal
counsel in executive session. At the July Meeting, Nuveen also made a
presentation and responded to questions. Following the presentations and
discussions of the materials presented to the Board, the Independent Board
Members met again in executive session with their counsel. As outlined in more
detail below, the Independent Board Members considered all factors they believed
relevant with respect to each Fund, including the impact that the Transaction
could be expected to have on the following: (a) the nature, extent and quality
of services to be provided; (b) the investment performance of the Funds; (c) the
costs of the services and profits to be realized by Nuveen and its affiliates;
(d) the extent to which economies of scale would be realized; and (e) whether
fee levels reflect those economies of scale for the benefit of investors. As
noted above, the Board Members had completed their annual review of the
respective Original Investment Management Agreements at the May Meeting and many
of the factors considered at the annual review were applicable to their
evaluation of the New Investment Management Agreements. Accordingly, in
evaluating the New Investment Management Agreements, the Board Members relied
upon their knowledge and experience with NAM and considered the information
received and their evaluations and conclusions drawn at the annual review. While
the Board reviewed many Nuveen funds at the July Meeting, the Independent Board
Members evaluated all information available to them on a fund-by-fund basis, and
their determinations were made separately in respect of each Fund.
A. NATURE, EXTENT AND QUALITY OF SERVICES
In evaluating the nature, quality and extent of the services expected to be
provided by NAM under the New Investment Management Agreements, the Independent
Board Members considered, among other things, the expected impact, if any, of
the Transaction on the operations, facilities, organization and personnel of
NAM; the potential implications of regulatory restrictions on the Funds
following the Transaction; the ability of NAM and its affiliates to perform
their duties after the Transaction; and any anticipated changes to the current
investment and other practices of the Funds.
The Board noted that the terms of each New Investment Management Agreement,
including the fees payable thereunder, are substantially identical to those of
the Original Investment Management Agreement relating to the same Fund (with
both reflecting reductions to fee levels in the complex-wide fee schedule for
complex-wide assets in excess of $80 billion that have an effective date of
August 20, 2007). The Board considered that the services to be provided and the
standard of care under the New Investment Management Agreements are the same as
the Original Investment Management Agreements. The Board Members further noted
that key personnel who have responsibility for the Funds in each area, including
portfolio management, investment oversight, fund management, fund operations,
product management, legal/compliance and board support functions, are expected
to be the same following the Transaction. The Board Members considered and are
familiar with the qualifications, skills and experience of such personnel. The
Board also considered certain information regarding anticipated retention or
incentive plans designed to retain key personnel. Further, the Board Members
noted that no changes to Nuveen's infrastructure or operations as a result of
the Transaction were anticipated other than potential enhancements as a result
of an expected increase in the level of investment in such infrastructure and
personnel. The Board noted MDP's representations that it does not plan to have a
direct role in the management of Nuveen, appointing new management personnel, or
directly impacting individual staffing decisions. The Board Members also noted
that there were not any planned "cost cutting" measures that could be expected
to reduce the nature, extent or quality of services. After consideration of the
foregoing, the Board Members concluded that no diminution in the nature, quality
and extent of services provided to the Funds and their shareholders is expected.
In addition to the above, the Board Members considered potential changes in the
operations of each Fund. In this regard, the Board Members considered the
potential effect of regulatory restrictions on the Funds' transactions with
future affiliated persons. During their deliberations, it was noted that, after
the Transaction, a subsidiary of Merrill Lynch is expected to have an ownership
interest in Nuveen at a level that will make Merrill Lynch an affiliated person
of Nuveen. The Board Members recognized that applicable law would generally
prohibit the Funds from engaging in securities transactions with Merrill Lynch
as principal, and would also impose restrictions on using Merrill Lynch for
agency transactions. They recognized that having MDP and Merrill Lynch as
affiliates may restrict the Nuveen funds' ability to invest in securities of
issuers controlled by MDP or issued by Merrill Lynch and its affiliates even if
not bought directly from MDP or Merrill
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ANNUAL INVESTMENT MANAGEMENT AGREEMENT
APPROVAL PROCESS (continued)
Lynch as principal. They also recognized that various regulations may require
the Nuveen funds to apply investment limitations on a combined basis with
affiliates of Merrill Lynch. The Board Members considered information provided
by NAM regarding the potential impact on the Nuveen funds' operations as a
result of these regulatory restrictions. The Board Members considered, in
particular, the Nuveen funds that may be impacted most by the restricted access
to Merrill Lynch, including: municipal funds (particularly certain
state-specific funds), senior loan funds, taxable fixed income funds, preferred
security funds and funds that heavily use derivatives. The Board Members
considered such funds' historic use of Merrill Lynch as principal in their
transactions and information provided by NAM regarding the expected impact
resulting from Merrill Lynch's affiliation with Nuveen and available measures
that could be taken to minimize such impact. NAM informed the Board Members
that, although difficult to determine with certainty, its management did not
believe that MDP's or Merrill Lynch's status as an affiliate of Nuveen would
have a material adverse effect on any Nuveen fund's ability to pursue its
investment objectives and policies.
In addition to the regulatory restrictions considered by the Board, the Board
Members also considered potential conflicts of interest that could arise between
the Nuveen funds and various parties to the Transaction and discussed possible
ways of addressing such conflicts.
Based on its review along with its considerations regarding services at the
annual review, the Board concluded that the Transaction was not expected to
adversely affect the nature, quality or extent of services provided by NAM and
that the expected nature, quality and extent of such services supported approval
of the New Investment Management Agreements.
B. PERFORMANCE OF THE FUNDS
With respect to the performance of the Funds, the Board considered that the
portfolio management personnel responsible for the management of the Funds'
portfolios were expected to continue to manage the portfolios following the
completion of the Transaction.
In addition, the Board Members recently reviewed Fund performance at the May
Meeting, as described above, and determined that Fund performance was
satisfactory or better, subject to the following. With respect to certain
municipal closed-end funds with relative short-term underperformance, the Board
Members concluded NAM was taking steps to evaluate the factors affecting
performance and those steps would continue following the Transaction. Further,
the investment policies and strategies were not expected to change as a result
of the Transaction.
In light of the foregoing factors, along with the prior findings regarding
performance at the annual review, the Board concluded that its findings with
respect to performance supported approval of the New Investment Management
Agreements.
C. FEES, EXPENSES AND PROFITABILITY
As described in more detail above, during the annual review, the Board Members
considered, among other things, the management fees and expenses of the Funds,
the breakpoint schedules, and comparisons of such fees and expenses with peers.
At the annual review, the Board Members determined that the respective Fund's
advisory fees and expenses were reasonable. In evaluating the costs of services
to be provided by NAM under the New Investment Management Agreements and the
profitability of Nuveen for its advisory activities, the Board Members
considered their prior conclusions at the annual review and whether the
management fees or other expenses would change as a result of the Transaction.
As described above, the investment management fee is composed of two
components--a fund-level component and complex-wide level component. The fee
schedule under the New Investment Management Agreements to be paid to NAM is
identical to that under the Original Investment Management Agreements, including
the modified complex-wide fee schedule. As noted above, the Board recently
approved a modified complex-wide fee schedule that would generate additional fee
savings on complex-wide assets above $80 billion. The modifications have an
effective date of August 20, 2007 and are part of the Original Investment
Management Agreements. Accordingly, the terms of the complex-wide component
under the New Investment Management Agreements are the same as under the
Original Investment Management Agreements. The Board Members also noted that
Nuveen has committed for a period of two years from the
108
date of closing of the Transaction that it will not increase gross management
fees for any Nuveen fund and will not reduce voluntary expense reimbursement
levels for any Nuveen fund from their currently scheduled prospective levels.
Based on the information provided, the Board Members did not expect that overall
Fund expenses would increase as a result of the Transaction.
In addition, the Board Members considered that additional fund launches were
anticipated after the Transaction which would result in an increase in total
assets under management in the complex and a corresponding decrease in overall
management fees under the complex-wide fee schedule. Taking into consideration
the Board's prior evaluation of fees and expenses at the annual renewal, and the
modification to the complex-wide fee schedule, the Board determined that the
management fees and expenses were reasonable.
While it is difficult to predict with any degree of certainty the impact of the
Transaction on Nuveen's profitability, at the recent annual review, the Board
Members were satisfied that Nuveen's level of profitability for its advisory
activities was reasonable. During the year, the Board Members had noted the
enhanced dialogue regarding profitability and the appointment of an Independent
Board Member as a point person to review methodology determinations and
refinements in calculating profitability. Given their considerations at the
annual review and the modifications to the complex-wide fee schedule, the Board
Members were satisfied that Nuveen's level of profitability for its advisory
activities continues to be reasonable.
D. ECONOMIES OF SCALE AND WHETHER FEE LEVELS REFLECT THESE ECONOMIES OF SCALE
The Board Members have been cognizant of economies of scale and the potential
benefits resulting from the costs of a Fund being spread over a larger asset
base. To help ensure that shareholders share in the benefits derived from
economies of scale, the Board adopted the complex-wide fee arrangement in 2004.
At the May Meeting, the Board Members reviewed the complex-wide fee arrangements
and noted that additional negotiations may be necessary or appropriate as the
assets in the complex approached the $91 billion threshold. In light of this
assessment coupled with the upcoming Transaction, at the June 15, 2007 meeting,
the ad hoc committee met with representatives of Nuveen to further discuss
modifications to the complex-wide fee schedule that would generate additional
savings for shareholders as the assets of the complex grow. The proposed terms
for the complex-wide fee schedule are expressed in terms of targeted cumulative
savings at specified levels of complex-wide assets, rather than in terms of
targeted marginal complex-wide fee rates. Under the modified schedule, the
schedule would generate additional fee savings beginning at complex-wide assets
of $80 billion in order to achieve targeted cumulative annual savings at $91
billion of $28 million on a complex-wide level (approximately $0.6 million
higher than those generated under the then current schedule) and generate
additional fee savings for asset growth above complex-wide assets of $91 billion
in order to achieve targeted annual savings at $125 billion of assets of
approximately $50 million on a complex-wide level (approximately $2.2 million
higher annually than that generated under the then current schedule). At the
July Meeting, the Board approved the modified complex-wide fee schedule for the
Original Investment Management Agreements and these same terms will apply to the
New Investment Management Agreements. Accordingly, the Board Members believe
that the breakpoint schedules and revised complex-wide fee schedule are
appropriate and desirable in ensuring that shareholders participate in the
benefits derived from economies of scale.
E. INDIRECT BENEFITS
During their recent annual review, the Board Members considered any indirect
benefits that NAM may receive as a result of its relationship with the Funds, as
described above. As the policies and operations of Nuveen are not anticipated to
change significantly after the Transaction, such indirect benefits should remain
after the Transaction. The Board Members further considered any additional
indirect benefits to be received by NAM or its affiliates after the Transaction.
The Board Members noted that other than benefits from its ownership interest in
Nuveen and indirect benefits from fee revenues paid by the Funds under the
management agreements and other Board-approved relationships, it was currently
not expected that MDP or its affiliates would derive any benefit from the Funds
as a result of the Transaction or transact any business with or on behalf of the
Funds (other than perhaps potential Fund acquisitions, in secondary market
transactions, of securities issued by MDP portfolio companies); or that Merrill
Lynch or its affiliates would derive any benefits from the Funds as a result of
the Transaction (noting that, indeed, Merrill Lynch would stand to experience
the discontinuation of principal transaction activity with the Nuveen funds and
likely would experience a noticeable reduction in the volume of agency
transactions with the Nuveen funds).
109
ANNUAL INVESTMENT MANAGEMENT AGREEMENT
APPROVAL PROCESS (continued)
F. OTHER CONSIDERATIONS
In addition to the factors above, the Board Members also considered the
following with respect to the Funds:
[] Nuveen would rely on the provisions of Section 15(f) of the 1940 Act.
Section 15(f) provides, in substance, that when a sale of a controlling
interest in an investment adviser occurs, the investment adviser or any of
its affiliated persons may receive any amount or benefit in connection with
the sale so long as (i) during the three-year period following the
consummation of a transaction, at least 75% of the investment company's
board of directors must not be "interested persons" (as defined in the 1940
Act) of the investment adviser or predecessor adviser and (ii) an "unfair
burden" (as defined in the 1940 Act, including any interpretations or
no-action letters of the SEC) must not be imposed on the investment company
as a result of the transaction relating to the sale of such interest, or
any express or implied terms, conditions or understanding applicable
thereto. In this regard, to help ensure that an unfair burden is not
imposed on the Nuveen funds, Nuveen has committed for a period of two years
from the date of the closing of the Transaction (i) not to increase gross
management fees for any Nuveen fund; (ii) not to reduce voluntary expense
reimbursement levels for any Nuveen fund from their currently scheduled
prospective levels during that period; (iii) that no Nuveen fund whose
portfolio is managed by a Nuveen affiliate shall use Merrill Lynch as a
broker with respect to portfolio transactions done on an agency basis,
except as may be approved in the future by the Compliance Committee of the
Board; and (iv) that NAM shall not cause the Funds and other municipal
funds that NAM manages, as a whole, to enter into portfolio transactions
with or through the other minority owners of Nuveen, on either a principal
or an agency basis, to a significantly greater extent than both what one
would expect an investment team to use such firm in the normal course of
business, and what NAM has historically done, without prior Board or
Compliance Committee approval (excluding the impact of proportionally
increasing the use of such other "minority owners" to fill the void
necessitated by not being able to use Merrill Lynch).
[] The Funds would not incur any costs in seeking the necessary shareholder
approvals for the New Investment Management Agreements (except for any
costs attributed to seeking shareholder approvals of Fund specific matters
unrelated to the Transaction, such as approval of Board Members, in which
case a portion of such costs will be borne by the applicable Funds).
[] The reputation, financial strength and resources of MDP.
[] The long-term investment philosophy of MDP and anticipated plans to grow
Nuveen's business to the benefit of the Nuveen funds.
[] The benefits to the Nuveen funds as a result of the Transaction including:
(i) as a private company, Nuveen may have more flexibility in making
additional investments in its business; (ii) as a private company, Nuveen
may be better able to structure compensation packages to attract and retain
talented personnel; (iii) as certain of Nuveen's distribution partners are
expected to be equity or debt investors in Nuveen, Nuveen may be able to
take advantage of new or enhanced distribution arrangements with such
partners; and (iv) MDP's experience, capabilities and resources that may
help Nuveen identify and acquire investment teams or firms and finance such
acquisitions.
[] The historic premium and discount levels at which the shares of the Nuveen
funds have traded at specified dates with particular focus on the premiums
and discounts after the announcement of the Transaction, taking into
consideration recent volatile market conditions and steps or initiatives
considered or undertaken by NAM to address discount levels.
110
G. CONCLUSION
The Board Members did not identify any single factor discussed previously as
all-important or controlling. The Board Members, including the Independent Board
Members, unanimously concluded that the terms of the New Investment Management
Agreements are fair and reasonable, that the fees therein are reasonable in
light of the services to be provided to each Fund and that the New Investment
Management Agreements should be approved and recommended to shareholders.
III. APPROVAL OF INTERIM CONTRACTS
As noted above, at the July Meeting, the Board Members, including the
Independent Board Members, unanimously approved the Interim Investment
Management Agreements. If necessary to assure continuity of advisory services,
the Interim Investment Management Agreements will take effect upon the closing
of the Transaction if shareholders have not yet approved the New Investment
Management Agreements. The terms of each Interim Investment Management Agreement
are substantially identical to those of the corresponding Original Investment
Management Agreement and New Investment Management Agreement, respectively,
except for certain term and escrow provisions. In light of the foregoing, the
Board Members, including the Independent Board Members, unanimously determined
that the scope and quality of services to be provided to the Funds under the
respective Interim Investment Management Agreement are at least equivalent to
the scope and quality of services provided under the applicable Original
Investment Management Agreement.
111
Reinvest Automatically
EASILY and CONVENIENTLY
Nuveen makes reinvesting easy. A phone call is all it takes to set up your
reinvestment account.
NUVEEN CLOSED-END FUNDS DIVIDEND REINVESTMENT PLAN
Your Nuveen Closed-End Fund allows you to conveniently reinvest dividends and/or
capital gains distributions in additional Fund shares.
By choosing to reinvest, you'll be able to invest money regularly and
automatically, and watch your investment grow through the power of tax-free
compounding. Just like dividends or distributions in cash, there may be times
when income or capital gains taxes may be payable on dividends or distributions
that are reinvested.
It is important to note that an automatic reinvestment plan does not ensure a
profit, nor does it protect you against loss in a declining market.
EASY AND CONVENIENT
To make recordkeeping easy and convenient, each month you'll receive a statement
showing your total dividends and distributions, the date of investment, the
shares acquired and the price per share, and the total number of shares you own.
HOW SHARES ARE PURCHASED
The shares you acquire by reinvesting will either be purchased on the open
market or newly issued by the Fund. If the shares are trading at or above net
asset value at the time of valuation, the Fund will issue new shares at the
greater of the net asset value or 95% of the then-current market price. If the
shares are trading at less than net asset value, shares for your account will be
purchased on the open market. If the Plan Agent begins purchasing Fund shares on
the open market while shares are trading below net asset value, but the Fund's
shares subsequently trade at or above their net asset value before the Plan
Agent is able to complete its purchases, the Plan Agent may cease open-market
purchases and may invest the uninvested portion of the distribution in
newly-issued Fund shares at a price equal to the greater of the shares' net
asset value or 95% of the shares' market value on the last business day
immediately prior to the purchase date. Dividends and distributions received to
purchase shares in the open market will normally be invested shortly after the
dividend payment date. No interest will be paid on dividends and distributions
awaiting reinvestment. Because the market price of the shares may increase
before purchases are completed, the average purchase price per share may exceed
the market price at the time of valuation, resulting in the acquisition of fewer
shares than if the dividend or distribution had been paid in shares issued by
the Fund. A pro rata portion of any applicable brokerage commissions on open
market purchases will be paid by Plan participants. These commissions usually
will be lower than those charged on individual transactions.
112
FLEXIBLE
You may change your distribution option or withdraw from the Plan at any time,
should your needs or situation change. Should you withdraw, you can receive a
certificate for all whole shares credited to your reinvestment account and cash
payment for fractional shares, or cash payment for all reinvestment account
shares, less brokerage commissions and a $2.50 service fee.
You can reinvest whether your shares are registered in your name, or in the name
of a brokerage firm, bank, or other nominee. Ask your investment advisor if his
or her firm will participate on your behalf. Participants whose shares are
registered in the name of one firm may not be able to transfer the shares to
another firm and continue to participate in the Plan.
The Fund reserves the right to amend or terminate the Plan at any time. Although
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants, there is no direct service charge to participants
in the Plan at this time.
CALL TODAY TO START REINVESTING DIVIDENDS AND/OR DISTRIBUTIONS
For more information on the Nuveen Automatic Reinvestment Plan or to enroll in
or withdraw from the Plan, speak with your financial advisor or call us at (800)
257-8787.
113
Glossary of
TERMS USED in this REPORT
[] AVERAGE ANNUAL TOTAL RETURN: This is a commonly used method to express an
investment's performance over a particular, usually multi-year time period.
It expresses the return that would have been necessary each year to equal
the investment's actual cumulative performance (including change in NAV or
market price and reinvested dividends and capital gains distributions, if
any) over the time period being considered.
[] AVERAGE EFFECTIVE MATURITY: The average of the number of years to maturity
of the bonds in a Fund's portfolio, computed by weighting each bond's time
to maturity (the date the security comes due) by the market value of the
security. This figure does not account for the likelihood of prepayments or
the exercise of call provisions unless an escrow account has been
established to redeem the bond before maturity. The market value weighting
for an investment in an inverse floating rate security is the value of the
portfolio's residual interest in the inverse floating rate trust, and does
not include the value of the floating rate securities issued by the trust.
[] INVERSE FLOATERS: Inverse floating rate securities are created by
depositing a municipal bond, typically with a fixed interest rate, into a
special purpose trust created by a broker-dealer. This trust, in turn, (a)
issues floating rate certificates typically paying short-term tax-exempt
interest rates to third parties in amounts equal to some fraction of the
deposited bond's par amount or market value, and (b) issues an inverse
floating rate certificate (sometimes referred to as an "inverse floater")
to an investor (such as a Fund) interested in gaining investment exposure
to a long-term municipal bond. The income received by the holder of the
inverse floater varies inversely with the short-term rate paid to the
floating rate certificates' holders, and in most circumstances the holder
of the inverse floater bears substantially all of the underlying bond's
downside investment risk. The holder of the inverse floater typically also
benefits disproportionately from any potential appreciation of the
underlying bond's value. Hence, an inverse floater essentially represents
an investment in the underlying bond on a leveraged basis.
[] LEVERAGE-ADJUSTED DURATION: Duration is a measure of the expected period
over which a bond's principal and interest will be paid, and consequently
is a measure of the sensitivity of a bond's or bond Fund's value to changes
when market interest rates change. Generally, the longer a bond's or Fund's
duration, the more the price of the bond or Fund will change as interest
rates change. Leverage-adjusted duration takes into account the leveraging
process for a Fund and therefore is longer than the duration of the Fund's
portfolio of bonds.
[] MARKET YIELD (ALSO KNOWN AS DIVIDEND YIELD OR CURRENT YIELD): An
investment's current annualized dividend divided by its current market
price.
[] NET ASSET VALUE (NAV): A Fund's common share NAV per share is calculated by
subtracting the liabilities of the Fund (including any MuniPreferred shares
issued in order to leverage the Fund) from its total assets and then
dividing the remainder by the number of shares outstanding. Fund NAVs are
calculated at the end of each business day.
[] TAXABLE-EQUIVALENT YIELD: The yield necessary from a fully taxable
investment to equal, on an after-tax basis, the yield of a municipal bond
investment.
[] ZERO COUPON BOND: A zero coupon bond does not pay a regular interest coupon
to its holders during the life of the bond. Tax-exempt income to the holder
of the bond comes from accretion of the difference between the original
purchase price of the bond at issuance and the par value of the bond at
maturity and is effectively paid at maturity. The market prices of zero
coupon bonds generally are more volatile than the market prices of bonds
that pay interest periodically.
114
Other Useful INFORMATION
QUARTERLY PORTFOLIO OF INVESTMENTS AND PROXY VOTING INFORMATION
Each Fund's (i) quarterly portfolio of investments, (ii) information regarding
how the Funds voted proxies relating to portfolio securities held during the
12-month period ended June 30, 2007, and (iii) a description of the policies and
procedures that the Funds used to determine how to vote proxies relating to
portfolio securities are available without charge, upon request, by calling
Nuveen Investments toll-free at (800) 257-8787 or on Nuveen's website at
www.nuveen.com.
You may also obtain this and other Fund information directly from the Securities
and Exchange Commission ("SEC"). The SEC may charge a copying fee for this
information. Visit the SEC on-line at http://www.sec.gov or in person at the
SEC's Public Reference Room in Washington, D.C. Call the SEC at 1-202-942-8090
for room hours and operation. You may also request Fund information by sending
an e-mail request to publicinfo@sec.gov or by writing to the SEC's Public
References Section at 450 Fifth Street NW, Washington, D.C. 20549.
CEO CERTIFICATION DISCLOSURE
For Funds listed on the New York Stock Exchange, each Fund's Chief Executive
Officer has submitted to the Exchange the annual CEO certification as required
by Section 303A.12(a) of the NYSE Listed Company Manual.
Each Fund has filed with the Securities and Exchange Commission the
certification of its Chief Executive Officer and Chief Financial Officer
required by Section 302 of the Sarbanes-Oxley Act.
INVESTMENT POLICY CHANGES
In February 2007, the Board of Directors/Trustees voted to remove investment
policy restrictions that limited the territorial bond holdings of these Funds to
a maximum of 10 percent of net assets. This change will give the Funds'
portfolio manager greater flexibility to achieve its investment objectives.
In May 2007, the Funds' Board of Directors/Trustees voted to permit the Funds'
to make loans from Fund assets to certain bond issuers. The amounts of these
loans are subject to strict limits. This policy is designed to enhance the
Funds' ability to meet their Funds' investment objectives by providing for
increased portfolio management flexibility, greater diversification potential,
and opportunities for increased capital appreciation over time.
BOARD OF DIRECTORS/TRUSTEES
Robert P. Bremner
Jack B. Evans
William C. Hunter
David J. Kundert
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Carole E. Stone
FUND MANAGER
Nuveen Asset Management
333 West Wacker Drive
Chicago, IL 60606
CUSTODIAN
State Street Bank & Trust Company
Boston, MA
TRANSFER AGENT AND
SHAREHOLDER SERVICES
State Street Bank & Trust Company
Nuveen Funds
P.O. Box 43071
Providence, RI 02940-3071
(800) 257-8787
LEGAL COUNSEL
Chapman and Cutler LLP
Chicago, IL
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
Chicago, IL
Each Fund intends to repurchase shares of its own common or preferred stock in
the future at such times and in such amounts as is deemed advisable. No shares
were repurchased during the period covered by this report. Any future
repurchases will be reported to shareholders in the next annual or semiannual
report.
115
Nuveen Investments:
-------------------
SERVING INVESTORS FOR GENERATIONS
Since 1898, financial advisors and their clients have relied on Nuveen
Investments to provide dependable investment solutions. For the past century,
Nuveen Investments has adhered to the belief that the best approach to investing
is to apply conservative risk-management principles to help minimize volatility.
Building on this tradition, we today offer a range of high quality equity and
fixed-income solutions that are integral to a well-diversified core portfolio.
Our clients have come to appreciate this diversity, as well as our continued
adherence to proven, long-term investing principles.
We offer many different investing solutions for our clients' different needs.
Managing $170 billion in assets, as of September 30, 2007, Nuveen Investments
offers access to a number of different asset classes and investing solutions
through a variety of products. Nuveen Investments markets its capabilities under
six distinct brands: Nuveen, a leader in fixed-income investments; NWQ, a leader
in value-style equities; Rittenhouse, a leader in growth-style equities;
Symphony, a leading institutional manager of market-neutral alternative
investment portfolios; Santa Barbara, a leader in growth equities; and
Tradewinds, a leader in global equities.
Find out how we can help you reach your financial goals.
To learn more about the products and services Nuveen Investments offers, talk to
your financial advisor, or call us at (800) 257-8787. Please read the
information provided carefully before you invest. Be sure to obtain a
prospectus, where applicable. Investors should consider the investment objective
and policies, risk considerations, charges and expenses of the Fund carefully
before investing. The prospectus contains this and other information relevant to
an investment in the Fund. For a prospectus, please contact your securities
representative or Nuveen Investments, 333 W. Wacker Dr., Chicago, IL 60606.
Please read the prospectus carefully before you invest or send money.
Learn more about Nuveen Funds at: www.nuveen.com/etf
Share prices
Fund details
Daily financial news
Investor education
Interactive planning tools
EAN-B-0807D
ITEM 2. CODE OF ETHICS.
As of the end of the period covered by this report, the registrant has adopted a
code of ethics that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer or controller, or
persons performing similar functions. There were no amendments to or waivers
from the Code during the period covered by this report. The registrant has
posted the code of ethics on its website at www.nuveen.com/etf. (To view the
code, click on the Investor Resources drop down menu box, click on Fund
Governance and then click on Code of Conduct.)
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Directors or Trustees determined that the registrant
has at least one "audit committee financial expert" (as defined in Item 3 of
Form N-CSR) serving on its Audit Committee. The registrant's audit committee
financial expert is Jack B. Evans, Chairman of the Audit Committee, who is
"independent" for purposes of Item 3 of Form N-CSR.
Mr. Evans was formerly President and Chief Operating Officer of SCI Financial
Group, Inc., a full service registered broker-dealer and registered investment
adviser ("SCI"). As part of his role as President and Chief Operating Officer,
Mr. Evans actively supervised the Chief Financial Officer (the "CFO") and
actively supervised the CFO's preparation of financial statements and other
filings with various regulatory authorities. In such capacity, Mr. Evans was
actively involved in the preparation of SCI's financial statements and the
resolution of issues raised in connection therewith. Mr. Evans has also served
on the audit committee of various reporting companies. At such companies, Mr.
Evans was involved in the oversight of audits, audit plans, and the preparation
of financial statements. Mr. Evans also formerly chaired the audit committee of
the Federal Reserve Bank of Chicago.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Nuveen California Dividend Advantage Municipal Fund 2
The following tables show the amount of fees that Ernst & Young LLP, the Fund's
auditor, billed to the Fund during the Fund's last two full fiscal years. For
engagements with Ernst & Young LLP the Audit Committee approved in advance all
audit services and non-audit services that Ernst & Young LLP provided to the
Fund, except for those non-audit services that were subject to the pre-approval
exception under Rule 2-01 of Regulation S-X (the "pre-approval exception"). The
pre-approval exception for services provided directly to the Fund waives the
pre-approval requirement for services other than audit, review or attest
services if: (A) the aggregate amount of all such services provided constitutes
no more than 5% of the total amount of revenues paid by the Fund to its
accountant during the fiscal year in which the services are provided; (B) the
Fund did not recognize the services as non-audit services at the time of the
engagement; and (C) the services are promptly brought to the Audit Committee's
attention, and the Committee (or its delegate) approves the services before the
audit is completed.
The Audit Committee has delegated certain pre-approval responsibilities to its
Chairman (or, in his absence, any other member of the Audit Committee).
SERVICES THAT THE FUND'S AUDITOR BILLED TO THE FUND
AUDIT FEES BILLED AUDIT-RELATED FEES TAX FEES ALL OTHER FEES
FISCAL YEAR ENDED TO FUND (1) BILLED TO FUND (2) BILLED TO FUND (3) BILLED TO FUND (4)
--------------------------------------------------------------------------------------------------------------------
August 31, 2007 $ 15,185 $ 0 $ 500 $ 1,500
--------------------------------------------------------------------------------------------------------------------
Percentage approved 0% 0% 0% 0%
pursuant to
pre-approval
exception
--------------------------------------------------------------------------------------------------------------------
August 31, 2006 $ 14,426 $ 0 $ 400 $ 2,900
--------------------------------------------------------------------------------------------------------------------
Percentage approved 0% 0% 0% 0%
pursuant to
pre-approval
exception
--------------------------------------------------------------------------------------------------------------------
(1) "Audit Fees" are the aggregate fees billed for professional services for
the audit of the Fund's annual financial statements and services provided
in connection with statutory and regulatory filings or engagements.
(2) "Audit Related Fees" are the aggregate fees billed for assurance and
related services reasonably related to the performance of the audit or
review of financial statements and are not reported under "Audit Fees".
(3) "Tax Fees" are the aggregate fees billed for professional services for tax
advice, tax compliance, and tax planning.
(4) "All Other Fees" are the aggregate fees billed for products and services
for agreed upon procedures engagements performed for leveraged funds.
SERVICES THAT THE FUND'S AUDITOR BILLED TO THE
ADVISER AND AFFILIATED FUND SERVICE PROVIDERS
The following tables show the amount of fees billed by Ernst & Young LLP to
Nuveen Asset Management ("NAM" or the "Adviser"), and any entity controlling,
controlled by or under common control with NAM ("Control Affiliate") that
provides ongoing services to the Fund ("Affiliated Fund Service Provider"), for
engagements directly related to the Fund's operations and financial reporting,
during the Fund's last two full fiscal years.
The tables also show the percentage of fees subject to the pre-approval
exception. The pre-approval exception for services provided to the Adviser and
any Affiliated Fund Service Provider (other than audit, review or attest
services) waives the pre-approval requirement if: (A) the aggregate amount of
all such services provided constitutes no more than 5% of the total amount of
revenues paid to Ernst & Young LLP by the Fund, the Adviser and Affiliated Fund
Service Providers during the fiscal year in which the services are provided that
would have to be pre-approved by the Audit Committee; (B) the Fund did not
recognize the services as non-audit services at the time of the engagement; and
(C) the services are promptly brought to the Audit Committee's attention, and
the Committee (or its delegate) approves the services before the Fund's audit is
completed.
FISCAL YEAR ENDED AUDIT-RELATED FEES TAX FEES BILLED TO ALL OTHER FEES
BILLED TO ADVISER AND ADVISER AND BILLED TO ADVISER
AFFILIATED FUND AFFILIATED FUND AND AFFILIATED FUND
SERVICE PROVIDERS SERVICE PROVIDERS (1) SERVICE PROVIDERS
--------------------------------------------------------------------------------------------------------
August 31, 2007 $ 0 $ 0 $ 0
--------------------------------------------------------------------------------------------------------
Percentage approved 0% 0% 0%
pursuant to
pre-approval
exception
--------------------------------------------------------------------------------------------------------
August 31, 2006 $ 0 $ 2,400 $ 0
--------------------------------------------------------------------------------------------------------
Percentage approved 0% 0% 0%
pursuant to
pre-approval
exception
--------------------------------------------------------------------------------------------------------
(1) The amounts reported for the Fund under the column heading "Tax Fees"
represents amounts billed to the Adviser exclusively for the preparation
for the Fund's tax return, the cost of which is borne by the Adviser. In
the aggregate, for all Nuveen funds for which Ernst & Young LLP serves as
independent registered public accounting firm, these fees amounted to
$161,400 in 2006. Beginning with fund fiscal years ending August 31, 2006,
Ernst & Young LLP will no longer prepare the fund tax returns.
NON-AUDIT SERVICES
The following table shows the amount of fees that Ernst & Young LLP billed
during the Fund's last two full fiscal years for non-audit services. The Audit
Committee is required to pre-approve non-audit services that Ernst & Young LLP
provides to the Adviser and any Affiliated Fund Services Provider, if the
engagement related directly to the Fund's operations and financial reporting
(except for those subject to the de minimis exception described above). The
Audit Committee requested and received information from Ernst & Young LLP about
any non-audit services that Ernst & Young LLP rendered during the Fund's last
fiscal year to the Adviser and any Affiliated Fund Service Provider. The
Committee considered this information in evaluating Ernst & Young LLP's
independence.
FISCAL YEAR ENDED TOTAL NON-AUDIT FEES
BILLED TO ADVISER AND
AFFILIATED FUND SERVICE TOTAL NON-AUDIT FEES
PROVIDERS (ENGAGEMENTS BILLED TO ADVISER AND
RELATED DIRECTLY TO THE AFFILIATED FUND SERVICE
TOTAL NON-AUDIT FEES OPERATIONS AND FINANCIAL PROVIDERS (ALL OTHER
BILLED TO FUND REPORTING OF THE FUND) ENGAGEMENTS) TOTAL
------------------------------------------------------------------------------------------------------------------------
August 31, 2007 $ 2,000 $ 0 $ 0 $ 2,000
August 31, 2006 $ 3,300 $ 2,400 $ 0 $ 5,700
"Non-Audit Fees billed to Adviser" for both fiscal year ends represent "Tax
Fees" billed to Adviser in their respective amounts from the previous table.
Audit Committee Pre-Approval Policies and Procedures. Generally, the Audit
Committee must approve (i) all non-audit services to be performed for the Fund
by the Fund's independent accountants and (ii) all audit and non-audit services
to be performed by the Fund's independent accountants for the Affiliated Fund
Service Providers with respect to operations and financial reporting of the
Fund. Regarding tax and research projects conducted by the independent
accountants for the Fund and Affiliated Fund Service Providers (with respect to
operations and financial reports of the Fund) such engagements will be (i)
pre-approved by the Audit Committee if they are expected to be for amounts
greater than $10,000; (ii) reported to the Audit Committee chairman for his
verbal approval prior to engagement if they are expected to be for amounts under
$10,000 but greater than $5,000; and (iii) reported to the Audit Committee at
the next Audit Committee meeting if they are expected to be for an amount under
$5,000.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant's Board of Directors or Trustees has a separately designated
Audit Committee established in accordance with Section 3(a)(58)(A) of the
Securities Exchange Act of 1934, as amended (15 U.S.C. 78c(a)(58)(A)). The
members of the audit committee are Robert P. Bremner, Jack B. Evans, William J.
Schneider and David J. Kundert. Mr. Eugene S. Sunshine, who also served as a
member of the Committee during this reporting period, resigned from the Board of
Directors effective July 31, 2007.
ITEM 6. SCHEDULE OF INVESTMENTS.
See Portfolio of Investments in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The registrant invests its assets primarily in municipal bonds and cash
management securities. On rare occasions the registrant may acquire, directly or
through a special purpose vehicle, equity securities of a municipal bond issuer
whose bonds the registrant already owns when such bonds have deteriorated or are
expected shortly to deteriorate significantly in credit quality. The purpose of
acquiring equity securities generally will be to acquire control of the
municipal bond issuer and to seek to prevent the credit deterioration or
facilitate the liquidation or other workout of the distressed issuer's credit
problem. In the course of exercising control of a distressed municipal issuer,
NAM may pursue the registrant's interests in a variety of ways, which may entail
negotiating and executing consents, agreements and other arrangements, and
otherwise influencing the management of the issuer. NAM does not consider such
activities proxy voting for purposes of Rule 206(4)-6 under the 1940 Act, but
nevertheless provides reports to the registrant's Board of Trustees on its
control activities on a quarterly basis.
In the rare event that a municipal issuer were to issue a proxy or that the
registrant were to receive a proxy issued by a cash management security, NAM
would either engage an independent third party to determine how the proxy should
be voted or vote the proxy with the consent, or based on the instructions, of
the registrant's Board of Trustees or its representative. A member of NAM's
legal department would oversee the administration of the voting, and ensure that
records were maintained in accordance with Rule 206(4)-6, reports were filed
with the SEC on Form N-PX, and the results provided to the registrant's Board of
Trustees and made available to shareholders as required by applicable rules.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
THE PORTFOLIO MANAGER
The following individual has primary responsibility for the day-to-day
implementation of the registrant's investment strategies:
NAME FUND
Scott R. Romans Nuveen California Dividend Advantage Municipal Fund 2
Other Accounts Managed. In addition to managing the registrant, the portfolio
manager is also primarily responsible for the day-to-day portfolio management of
the following accounts:
TYPE OF ACCOUNT NUMBER OF
PORTFOLIO MANAGER MANAGED ACCOUNTS ASSETS
-------------------- -----------------------------------------------------------
Scott R. Romans Registered Investment Company 28 $5.806 billion
Other Pooled Investment Vehicles 0 $0
Other Accounts 3 $.52 million
o Assets are as of August 31, 2007. None of the assets in these accounts are
subject to an advisory fee based on performance.
Compensation. Each portfolio manager's compensation consists of three basic
elements--base salary, cash bonus and long-term incentive compensation. The
compensation strategy is to annually compare overall compensation, including
these three elements, to the market in order to create a compensation structure
that is competitive and consistent with similar financial services companies. As
discussed below, several factors are considered in determining each portfolio
manager's total compensation. In any year these factors may include, among
others, the effectiveness of the investment strategies recommended by the
portfolio manager's investment team, the investment performance of the accounts
managed by the portfolio manager, and the overall performance of Nuveen
Investments, Inc. (the parent company of NAM). Although investment performance
is a factor in determining the portfolio manager's compensation, it is not
necessarily a decisive factor. The portfolio manager's performance is evaluated
in part by comparing manager's performance against a specified investment
benchmark. This fund-specific benchmark is a customized subset (limited to bonds
in each Fund's specific state and with certain maturity parameters) of the
S&P/Investortools Municipal Bond index, an index comprised of bonds held by
managed municipal bond fund customers of Standard & Poor's Securities Pricing,
Inc. that are priced daily and whose fund holdings aggregate at least $2
million. As of September 30, 2007, the S&P/Investortools Municipal Bond index
was comprised of 51,709 securities with an aggregate current market value of
$999 billion.
Base salary. Each portfolio manager is paid a base salary that is set at a level
determined by NAM in accordance with its overall compensation strategy discussed
above. NAM is not under any current contractual obligation to increase a
portfolio manager's base salary.
Cash bonus. Each portfolio manager is also eligible to receive an annual cash
bonus. The level of this bonus is based upon evaluations and determinations made
by each portfolio manager's supervisors, along with reviews submitted by his
peers. These reviews and evaluations often take into account a number of
factors, including the effectiveness of the investment strategies recommended to
the NAM's investment team, the performance of the accounts for which he serves
as portfolio manager relative to any benchmarks established for those accounts,
his effectiveness in communicating investment performance to stockholders and
their representatives, and his contribution to the NAM's investment process and
to the execution of investment strategies. The cash bonus component is also
impacted by the overall performance of Nuveen Investments, Inc. in achieving its
business objectives.
Long-term incentive compensation. Each portfolio manager is eligible to receive
bonus compensation in the form of equity-based awards issued in securities
issued by Nuveen Investments, Inc. The amount of such compensation is dependent
upon the same factors articulated for cash bonus awards but also factors in his
long-term potential with the firm.
Material Conflicts of Interest. Each portfolio manager's simultaneous management
of the registrant and the other accounts noted above may present actual or
apparent conflicts of interest with respect to the allocation and aggregation of
securities orders placed on behalf of the Registrant and the other account. NAM,
however, believes that such potential conflicts are mitigated by the fact that
the NAM has adopted several policies that address potential conflicts of
interest, including best execution and trade allocation policies that are
designed to ensure (1) that portfolio management is seeking the best price for
portfolio securities under the circumstances, (2) fair and equitable allocation
of investment opportunities among accounts over time and (3) compliance with
applicable regulatory requirements. All accounts are to be treated in a
non-preferential manner, such that allocations are not based upon account
performance, fee structure or preference of the portfolio manager. In addition,
NAM has adopted a Code of Conduct that sets forth policies regarding conflicts
of interest.
Beneficial Ownership of Securities. As of the August 31, 2007, the portfolio
manager beneficially owned the following dollar range of equity securities
issued by the Registrant and other Nuveen Funds managed by NAM's municipal
investment team.
--------------------------------------------------------------------------------------------------------------------
DOLLAR RANGE OF
DOLLAR EQUITY SECURITIES
RANGE OF BENEFICIALLY OWNED
EQUITY IN THE REMAINDER OF
SECURITIES NUVEEN FUNDS
BENEFICIALLY MANAGED BY NAM'S
NAME OF PORTFOLIO OWNED IN MUNICIPAL
MANAGER FUND FUND INVESTMENT TEAM
--------------------------------------------------------------------------------------------------------------------
Scott R. Romans Nuveen California Dividend Advantage Municipal Fund 2 $0 $10,000-$50,000
--------------------------------------------------------------------------------------------------------------------
PORTFOLIO MANAGER BIO:
Scott R. Romans, PhD, joined Nuveen Investments in 2000 as a senior analyst in
the education sector. In 2003, he was assigned management responsibility for
several closed- and open-ended municipal bond funds most of which are state
funds covering California and other western states. He has been Vice President
of NAM since 2004, Portfolio Manager since 2003, and was, formerly, Assistant
Vice President (2003-2004) and Senior Analyst (2000-2003). Currently, he manages
investments for 29 Nuveen-sponsored investment companies. He holds an
undergraduate degree from the University of Pennsylvania and an MA and PhD from
the University of Chicago.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrants Board implemented after the registrant
last provided disclosure in response to this item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of this report that includes the disclosure
required by this paragraph, based on their evaluation of the controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")
(17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter
of the period covered by this report that has materially affected, or
is reasonably likely to materially affect, the registrant's internal
control over financial reporting.
ITEM 12. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Not applicable
because the code is posted on registrant's website at www.nuveen.com/etf and
there were no amendments during the period covered by this report. (To view the
code, click on the Investor Resources drop down menu box, click on Fund
Governance and then Code of Conduct.)
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a) under
the 1940 Act (17 CFR 270.30a-2(a)) in the exact form set forth below: Ex-99.CERT
Attached hereto.
(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under
the 1940 Act (17 CFR 270.23c-1) sent or given during the period covered by the
report by or on behalf of the registrant to 10 or more persons. Not applicable.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the 1940 Act (17 CFR
270.30a-2(b)); Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR
240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter 63 of Title 18 of
the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished
pursuant to this paragraph will not be deemed "filed" for purposes of Section 18
of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of
that section. Such certification will not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933 or the Exchange Act,
except to the extent that the registrant specifically incorporates it by
reference. Ex-99.906 CERT attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Nuveen California Dividend Advantage Municipal Fund 2
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By (Signature and Title)* /s/ Kevin J. McCarthy
----------------------------------------------
Kevin J. McCarthy
Vice President and Secretary
Date: November 9, 2007
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Gifford R. Zimmerman
----------------------------------------------
Gifford R. Zimmerman
Chief Administrative Officer
(principal executive officer)
Date: November 9, 2007
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By (Signature and Title)* /s/ Stephen D. Foy
----------------------------------------------
Stephen D. Foy
Vice President and Controller
(principal financial officer)
Date: November 9, 2007
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* Print the name and title of each signing officer under his or her signature.